Technological Damnation 86: Template Mania

We’ll admit that compared to the rest of the technological damnations, and damnations like Cybersecurity / Cyberattack (76), The Cloud (80), and Dashboards (84) in particular, just to name a few, this particular damnation isn’t that bad [and it’s certainly no Big Data (79) or Spreadsheet (83)]. But it’s bad enough to make our list. Why? Let’s get to it.

But first, what is a template? Well, that depends. Wikipedia has over a dozen definitions for templates, including:

  • a pre-developed page layout in electronic or paper media used to make new pages with a similar design, pattern, or style;
  • a standardized non-executable file type used by computer software as a pre-formatted example on which to base other files, especially documents; and
  • a master page on which you can globally edit and format graphic elements and text common to each page of a document.

However none of these definitions really clarify what a template is. So let’s consider a few of the templates we use in Supply Management.

  • RFX templates to quick start sourcing projects for common or previously sourced categories
  • Strategic Souring Decision Optimization templates for pre-defining models
  • Data collection templates for analyzing surveys using BI tools
  • Scorecard templates for supplier performance monitoring
  • Workflow templates for setting up a sourcing project
  • Workflow templates for (automatically) approving invoices

And right now you’re probably even more confused. And that’s the point.

Extreme template proliferation makes it hard to even identify what a template is.

Is it a form? It is a form generator? Is it a workflow that powers a form generator to create a form custom for your sourcing project? Is it copyable, or just configurable? Is it specific to you, your project, your organization, and/or your platform? Can it be altered by you, by an administrator, or just a vendor rep? The questions are dizzying. And we still haven’t addressed the fact that …

Even if we can define what a template is, it’s hard to know when it could be used.

Take a quick-start sourcing template for mobile electronics. If it was designed for cell phones, can it be used as-is for smart phones or does it need minor edits. What about tablets. And what about those damn unclassifiable phablets. Aaarrrggghhh!

With so many options for each situation, it’s almost impossible to know which one is best.

If the templates can be copied and altered, there might be the vendor template, the modified template from the Center of Excellence, the modified modified template from the last Sourcing project created by the previous buyer, a modified vendor template from another region created by yet another buyer, a third party template in the customer network on the vendor’s site, and so on. Which one is best? Are any appropriate? At this point you just want to bang your head against the brick walls.

And how do we keep them all up to date?

This is the real damnation. Not only do we have to keep a never ending deluge of data up to date, but we have to now keep a never ending deluge of templates that may or may not be used to capture the never ending deluge of data up to date. Ack!


Data, data everywhere
and all the tables burst
Data, data everywhere
we thought it’d get no worse

State of Flux Has the Treatment for Your SRM Ailments: Part I The Need

But before we talk about the treatment, we’re going to talk about State of Flux‘s recent event in Chicago which was the US launch for their most recent Global SRM Research Report, The Business of Supplier Relationships, which is their 7th annual research report on the subject. We’ll talk about this report too, but first, let’s talk about the event, or more appropriately, the need for SRM as explained by the event.

Large organizations, including those desperate for savings, around the globe are leaving millions on the table on a regular basis. Some of this is due to a failure to capture negotiated savings (as per AMR’s classic series on Reaching Sourcing Excellence), and some of this is due to a failure to maximize the value of supplier relationships.

The heart of the matter is that the value delivered by your organization to its customers is ultimately dependent upon the value created and delivered by your suppliers that manufacture the product, pack the product for delivery, and provide warranty and repair services for the product. If the product is poor, delivered late (which results in stock outs and lost sales), packaged very poorly (which results in a large number of damaged units on delivery), or the warranty and repair services are slow and leave much to be desired, your customers won’t be happy with you, and there goes your perceived value and future revenue.

In other words, suppliers are critical to delivering the value that you promise your customers. But they are also critical to delivering the value required by your organization. Regardless of how good the products are, your organization needs higher quality products at a lower cost, new products to attract new marketshare, leaner production, lower cost delivery, and other renovations and innovations that add to the top line while shaving from the bottom line. This won’t happen without supplier involvement.

And suppliers won’t be involved unless the relationship is collaborative. Even though CAPS Research (Japan) has been telling us for almost a decade that collaborative supply management is the key to success, the concept hasn’t taken off much (yet) here in North America. While collaborative supply management has penetrated the Hackett Group top 8%, it’s not daily practice in the Sourcing and Procurement groups at many companies. But it should be.

The fact of the matter is there is considerable research, in addition to State of Flux’s Global SRM Research report (which has now been published 7 years in a row), that demonstrates the value of SRM. Consider the research undertaken by Planning Perspectives Inc. on the automotive sector over the last 14 years, which was presented at the Chicago event, which has not only found that the gross profit per vehicle increases as working relations improve (as per the Working Relations Index), but that 71% of the positive change is contributeable to changes in the supplier relationship. Let’s repeat that: 71% of profit increase in the automotive sector can be directly correlated to improvement in supplier relations. Not e-Procurement. Not spend analysis. Not strategic sourcing. Supplier relations. In addition, the more collaborative the working relation, the greater the price recessions offered up by suppliers in response to requested price reductions, even if the requested price reduction requested is lower than the average price reduction request. More specifically, companies with good supplier relations typically achieve 8% to 12% more price concessions than their peers.

Moreover, when there is a good working relationship:

  • suppliers are more willing to share new technology and innovations without the up-front assurance of a purchase order
  • suppliers are willing to invest in new technology in anticipation of new or additional business
  • suppliers are willing to communicate openly and honestly, which prevents surprises down the road that can lead to stock-outs or supply chain disruptions
  • suppliers are willing to support the organization above and beyond contractual obligations

And a good working relationship stems from supplier relationship management. In our next post we’ll delve deeper into some of the highlights of the State of Flux Chicago event before we reveal some of the most interesting findings from this year’s report.

Consumer Damnation 72: Corporations

In consumer damnation 71, we talked about governments and how government customers can not only be very demanding, but how they can be quick to pass on the blame to your company when something goes wrong even if it’s not your company’s fault. In addition, they generally mandate that you provide bill of material data, shipping manifests, country of origin determinations, quality inspections, and other information with every product that you provide the government so they can meet their accountability mandates — a paperwork nightmare, especially if all you are selling is office supplies. And if that’s not enough, if the government runs out of budget and can’t get agreement to run a deficit, there can be an indefinite spending freeze while the situation is resolved — and if you are waiting on a few million dollars for products and/or services delivered, you could be waiting quite a long time. They can be your organization’s best and worst customer.

That is, until your corporate customers are taken into account. Government customers will always give you headaches, but corporate clients will often give you nightmares. But that’s partially a story for different post. In this post, we are going to talk about specifically how they can be a nightmare for your Procurement organizations.

They can demand the SLAs be met — or penalties be applied.

If a big corporation knows that a good chunk of your organization’s revenue needs are dependent upon getting their contract, they will be very demanding in their negotiations and your sales team might end up agreeing to rather unfair SLAs that Procurement will be expected to deliver on. For example, there might be a penalty for every day a shipment is late, which could be something out of your control if a port closes, a primary transportation company’s drivers go on strike, or the supplier’s source of raw material dries up due to a mine collapse and there is no way to get a new shipment of the product produced on time to transport from the new supplier’s factory in Shanghai to the distribution facility in San Francisco, but yet Procurement will be held accountable when the shipment is late and penalties are applied to the invoice.

They can not only insist on extreme corporate responsibility requirements and demand not only end-to-end supply chain transparency, but that every supply chain participant be one that has been vetted by an accepted third party audit in the past two years.

This can make complying with the documentary requirements that the local government will insist on a walk in the park. As a good corporate citizen, you would have mapped your supply chain and vetted all of your tier 1 and critical tier 2 and tier 3 suppliers, but considering there could be over ten thousand suppliers in your corporate supply chains when you consider every purchase from the 50M you spend on your primary electronics retail products to the 50K you spend on miscellaneous office suppliers, its an almost insurmountable task to identify every organization in the chain and map them against a list of audited suppliers. If your choices are do your best to comply or lose a third of your revenue (because you are CPG and they are the biggest of your big box retailer clients), it might be the case that you really don’t have a choice.

They can be a real pain in the backside.

If they are a big customer, in addition to the huge discounts they negotiated during the sales process, they might expect free service, warranty support beyond the warranty period, and the ability to make additional purchases at a moment’s notice. And who has to arrange that free service, deal with the manufacturer to try and negotiate additional warranty support, convince the supplier to add a second shift, or find an additional source of supply at 7 pm on a Friday night? That’s right, Procurement.

Corporate customers don’t just make hell for Sales, they often make hell for Procurement too. And when they decide to spread the damnation, Procurement is the organization that really feels the burn.

It is NOT Direct or Indirect — It is Strategic and Complexity!

Now that we’ve set the record straight on sourcing, it’s not a suite, it’s just sourcing; and optimization, it’s not optimization, it’s strategic sourcing; it’s time to set the record straight on another rampant misconception perpetuated by vendors who make their living off of the ignorance they perpetuate.

It is not direct or indirect — it is strategy and complexity.

The right way to source a category has absolutely nothing to do with whether it is a direct category for your organization or an indirect category for your business. Nor does it have anything to do with whether or not it is a category regularly sourced by your GPO or whether or not the GPO has it under contract.

First of all, as we elucidated in our most recent paper on “Complex Sourcing: Are You Ready”, even the categories that were traditionally seen as the simplest indirect categories are sometimes actually among the most complex “direct” categories that the organization possesses!

Secondly, what is indirect for your organization is direct for another organization, and a supplier in particular. Calling it indirect only masks the fact that, at some point in the supply chain it is a complex direct category and if your supplier, or GPO, is not approaching it correctly, a significant amount of money is being left on the table.

While there are some that would very much like to forget that before the introduction of e-Negotiation (e-RFx and e-Auctions), a number of “indirect” categories used to cost organizations millions — such as tires in automotive, lights in aviation and printer ink in back offices everywhere — this is not the right thing to do. We have to remember that these organizations never understood how much these “secondary” categories were really costing them and that, sometimes, 100% profit margins were the norm, because they often did not have the ability to go out to market like we do today.

Thirdly, while a product organization might see services as indirect as such a category would be labelled as non-core, and, similarly, while a service (or financial) organization might see a product category as indirect as it too would be labelled non-core, if such service, or product, is essential for the organization to deliver the product, or services, the organization profits on to the end consumer, how can such a service, or product, really be non-core?

For example, if successfully selling that next generation cellphone requires augmenting the supplier’s design team with a new design team that can enhance usability above the competitor’s product without sacrificing a low-price point or quality, that is a critical service and should not be treated as a secondary outsourced indirect category. Similarly, if delivery of your big data analytics services requires a specific high-end laptop configuration that can not be easily met by all providers, and a sub-par configuration would result in delays or service degradations, this is not a category that can be thrown over the wall to a GPO either.

In other words, direct or indirect has no correlation to the complexity of a category or its strategic importance to the business and, thus, should not be used to determine the appropriate sourcing strategy. The right way to initially classify a category is to use a basic measure that that captures its strategic importance and its complexity and any category with a measure that exceeds a certain threshold must be strategically sourced. The rest can be sourced using simple spot-buys or other traditional methods provided that they are not too complex, or too strategic in someone’s view, for these traditional methods.

Regulatory Damnation 37: Industry Associations and Standards

One would think that the regulatory damnations would stop with the ever increasing onslaught of regulations being passed around the globe that restrict the organization on:

  • raw materials,
  • production processes,
  • available labour, and
  • third party providers

that collectively cover

  • environmental regulation,
  • energy and water usage,
  • slave labour, human trafficking, and child labour,
  • oversight and documentary requirements,
  • taxation and reporting, and
  • corporate social responsibility and ethics

among a few dozen other regulatory requirements. But they don’t.

To top it all off, you have to deal with industry association standards that you have to include in your products or face becoming the next pariah. In today’s hyper-connected, mega-corporate world where a few big companies determine the fates of thousands of smaller companies who sink or swim on as a result of their boycott or their support, your company’s fate could rely on another companies whim. So if that company enthusiastically supports a standard that you don’t, that could be the end for you. But that’s just the beginning of the damnation.

Newly enacted standards could be the exact opposite of the protocols you built your product on.

For example, you could have designed your electronics product to work on DC current but the new standard for the GPS system, designed to be used in the car and on the trail, is AC with an AC to DC adapter. All of a sudden, you can’t get the Industry Association seal of approval and your product is dropped by all of the major electronics retailers.

Newly enacted standards could redefine the communications interface.

You might have spent years developing a custom communications protocol to interface with your new mobile weather data reader, but then the major software packages adopt a new standard you weren’t expecting and drop support for your standard faster than a hot tomato and your product can’t even be sold through the discount outlets because there is no support for it.

Newly enacted self-imposed regulations could prohibit the purchase of raw materials from producers expected to violate fair-wage and human rights principles.

If you already locked into a contract with a producer that has been banned, all of a sudden you could be the target of competitors negative advertising campaigns that target you as a consumer of unfairly produced goods. This could destroy your brand value if you are buying raw materials that might be harvested by child or slave labour, even if the claim has no evidence to back it up.

While industry standards are not as damning as regulatory damnations, as industrial competitors cannot seize your goods, levy fines, or press criminal charges, they are still damning as we noted above because if you fail to honour the industry association’s boycott, you could be the target of negative advertising. And the right negative advertising can considerably damage your brand, plummet your stock, and bring sales to a trickle. This damnation, that likes to hide in the shadows, doesn’t emerge often, but when it does, it’s a doozy.