SIM Powered Recovery Will Take Your Recovery to the Next Level!

Every year, corporations are at risk of losing significant dollars due to transactional errors such as: over payments, duplicate payments, missed rebates, missed discounts, lost credits, and fraud.

The money is lost with no chance to reclaim it unless a recovery audit is performed. Most recovery audit service providers claim on their websites and marketing material that they can recover between $500,000 and $1M per every $1B that a company spends on an annual basis.

Even under the most conservative estimates, this problem is costing mid-sized and large companies millions of dollars every year.

Unfortunately, the recovery audit industry relies heavily on manual processes which focus almost entirely on a client’s historical transactional records. Manual processes are time-consuming, inconsistent, expensive, and focus too heavily on client records. The methodologies, while they do add value, leave a large portion of the recovery opportunity unexplored.

Over the last several years, some service providers have developed technology-enabled recovery processes that are accurate, complete and deliver claims in real-time. Even more recently, some recovery solutions have seen the incorporation of a supplier information management (SIM) application and have drastically improved audit results.

The combination of recovery audit technology and SIM drives more supplier compliance, significantly out-recovers manual recovery methodologies and improves the organization’s working capital situation as a result of the recovery process. In addition, even when delivered separately from any recovery product, SIM is a powerful tool that offers significant benefits to a financial organization by driving lower costs, streamlining supplier on-boarding, reducing working capital, improving strategic supplier management and decreasing payment fraud.

To find out how SIM-Powered Recovery can improve your recovey results by a factor of 3, 5, or even 9, and maximize your return, download the latest Sourcing Innovation Illumination, sponsored by Lavante on Taking Capital Recovery to the Next Level. When you find out how you can save hundreds of thousands while recovering millions, you won’t be disappointed!

New Estimates Put the Driver Shortage at 240,000 Drivers!

And, if what I’m reading is right, IT’S ALL OUR FAULT!

But before we get to why, let’s spell out that number. Two Hundred And Forty Thousand! That’s almost double what the estimates were as recently as a year and a half ago! That’s one scary number! How are we going to increase the number of drivers by 10% in the next decade when one third of drivers are going to reach retirement age and the average graduate age from driver training schools is 54! (Which means that the percentage of drivers set to reach retirement age in the next decade is increasing every year and it won’t be long before two thirds of drivers will be less than a decade away from retirement age!)

Needless to say if the American Trucking Associations (ATA) is right and the shortage is 240K, we have a serious situation on our hands. And the severity is only increased if the Owner Operators and Independent Drivers Association (OOIDA) is right and that, despite the fact that some 40,000 new commercial driver licenses are granted by DOT annually, turnover is 100+ percent per year due to poor working conditions.

And it sounds like working conditions are getting worse each year. From my research, this is what the reality of the situation is:

  • truck drivers make an average wage of only 38K per year;
    4K less than the per capita personal income and 13K less than the median household income in the US as of January, 2012
  • truck drivers have to drive up to fourteen hours a day
    and receive roughly 10 hours off before their next shift despite the fact that legislation limits the amount of driving a trucker is supposed to do
  • truck drivers commonly have to work 6 day weeks
  • truck drivers have a dangerous job
    as 12% of all work-related deaths in the US are from truck drivers in auto accidents
  • truck drivers are lucky to earn minimum wage
    when you add up all of the time they have to be on the job driving and waiting (in traffic, at warehouses, etc.)
  • truck drivers don’t always get to eat well
    as evidenced by the fact that only 14% of truck drivers in the US are not overweight or obese
  • truck drivers don’t get good medical care
    as they can’t keep regular appointments with regular doctors and can’t always go to the doctor when they should
  • truck drivers often have to sleep in their cabs in unsafe conditions
    as States are continually shutting down designated trucker rest stops along interstates to cut costs and long haul truckers often have to race for a safe position at truck stops, with over 90% of open spots filled on a nightly basis

In other words, working conditions are bad, getting worse, and since we’re not doing anything about it, it’s all our fault. You take the time to make sure there’s no child labour in your supply chain. You take the time to make sure that your suppliers are paying minimum wage. But do you take the time to make sure that your shippers are treating their drivers well and making sure they stay healthy and safe?

Despite the fact that the US has a 100 year lead on China on the rails

China is kicking the USA’s @ss when it comes to rail. A couple of months ago, China launched the world’s longest high-speed rail route from Beijing to Guangzhou, in South China, which connects the two cities that are 2,298 km apart, in an eight-hour commute! (Source: China Daily) That’s about two and a half times faster than you can commute between two cities using the fastest ground transportation in the US.

It’s bad enough that there’s no Free Market on the Rails, but the fact that this appears to have completely stalled Rail development in the US is just insane. There’s only one route in the entire US that exceeds 175 kph, official high speed, and the average speed over the line is 135 kph. In comparison, the high-speed trains in Japan and China operate at an average of 220 kph and 285 kph!

The sad thing is that it will be at least 15 more years before the US has a decent high-speed rail line, and that’s only if the California High-Speed Rail Authority actually starts to build their high-speed rail line between Anaheim and San Francisco, which seems to be perpetually stalled (as construction has not yet begun and the completion date for the first phase has been pushed until 2018 in their efforts to save a dime while losing the dollar). And if the California High Speed Rail Authority fails, then we’re looking at 2040 before Amtrak builds its high-speed rail between New York and Washington. (Wow! Twenty-seven years to build two hundred and thirty miles worth of track. Are they serious? At the rate China builds high-speed rail lines, they’d have it built in five and a half months! The railroad tycoons must be doing cartwheels in their graves!)

If China continues to progress in leaps and bound across the board in supply chain infrastructure while the US sits still, the Economist will be right and China will overtake America as the world leader before the end of the current administration (which is too busy appeasing the fat cats and slashing its own productivity to notice). It’s a sorry state of affairs, but maybe you should be manufacturing in China — for the emerging Chinese consumer!

Adoption a Problem? Incentives are the Answer!

Just make sure they are the right incentives.

As per this article by Mitch Free on Forbes.com on the Best Advice a CEO Ever Received, your incentive plan works. You will get the results you incentivize, so be careful of and monitor for unintended consequences.

As per the article, Mr. Free couldn’t understand why, when he took his car in for a wash, the attendant was so insistent in fixing a “pitting” on his windshield that he couldn’t see that the attendant even offered to do the fix for the same price as the wash and give the wash for free, which did not make much sense. So Mr. Free emailed the owner, who stated that he was paying a $5 commission on window repair sales, and none on car washes, in an effort to increase window repair sales and that Mr. Free’s e-mail explained why there was a big spike in people getting their windshields’ fixed but not getting their car washed. It was an unintended consequence of the incentive plan.

The same holds true where Supply Management software is concerned. Adoption will depend on the incentive plan. A proper incentive plan will go a long way to getting utilization, but an improper one will go even further to jeopardizing your supply management returns. For example, if you made a worker’s bonus contingent on using the new e-Procurement system, and then calculated a certain percentage of his bonus based upon total spend put through the system, you might find that, at the end of the year, that worker put as much spend as he possibly could through the system. And while you might think this is the intended consequence, you might also find that spending overall on indirect categories such as office supplies, computer and electronics equipment, and temp services increased 10% year over year. Why? Instead of doing quick RFXs and then negotiating bulk purchases with the lowest bidder, the buyer bought everything he could through the vendors already integrated (via EDI, punch-out, etc.) with the e-Procurement system, even though most of the purchases were for off-contract items that were, on average, 10% higher than rates that could have been obtained with a new sourcing contract with another vendor.

In this scenario, the right incentive plan would be to incentivize buyers on achieved year-over year savings on spend under management, where spend under management is that spend that is negotiated or managed through a supply management system, whether it is the e-Procurement system, the e-Sourcing system, or the Contract Management system. This way, the system will be used when it’s appropriate, and the buyer is only rewarded when savings are achieved.