Sustainability Requires Shared Understanding

A recent article on “Sustainable Success” over on the CPO Agenda discussed three challenges that, when addressed, can lead to success in sustainability efforts. The challenge of tools and transition to better processes is well known, and straight-forward to address. The challenge of recognizing the achievements of supply management professionals is lesser known, but there are a number of techniques that can be used to address this challenge. However, the challenge of building a common understanding of just what sustainability means and why it is relevant to procurement is often overlooked and not as easy to address.

As the article notes, first among the difficulties in getting sustainability right is making sure everyone sees the same potential benefits. This means a common understanding that goes beyond what the term sustainability means on its own, but what it means for Supply Management and the organization as a whole. As the article notes, sustainable procurement aims for the same outcomes that any buyer would wish to see in their work, and delivers some additional benefits that can go beyond the buying organization. In particular, it means seeking benefits now that do not impact the ability to seek benefits in the future. The impact of activities must be considered not just with respect to the current sourcing event, but over the lifetime of the category and any affected supplier relationships.

So how do you come up with a common definition?

As the article notes, a good way to start is by determining how a potential decision stacks up with respect to some key factors, such as:

  • customer reputation
    does it increase your net worth in the eyes of a customer (who has also embarked on a sustainability agenda)
  • risk management
    does it decrease your overall risk exposure (in terms of supply availability, reputational damage, or media exposure)
  • medium / long term value
    does it decrease costs, increase quality, or insure available supply
  • supplier relationship(s)
    will the supplier partner in innovation to reduce production costs, reduce waste, and decrease environmental impact

And then by determining how the decision stacks up with respect to concrete sustainability factors such as:

  • raw materials
    are the materials you are using renewable and can they be extracted with minimal harm to the environment
  • energy requirements
    are the energy requirements associated with your purchase (for production, storage, and transportation) minimal and can they be met with renewable resources
  • waste products
    are waste products minimal and/or reusable and/or reclaimable? can the food waste be used to feed livestock? can the metal waste be melted down and reused?
  • worker treatment
    are all workers who take part in your supply chain treated ethically, responsibly, and fairly, using standard guidelines, such as those outlined by JLP

If a supply management decision would increase customer reputation, reduce risk, contribute to medium and long term value, enhance supplier relationships, use renewable (and non-environmentally harmful) raw materials, reduce energy requirements, minimize (or eliminate) waste in production, and do all this in the context of ethical worker treatment, then, regardless of what definition of sustainability each individual on a cross-functional sourcing team is partial to, it should be easy to agree that such a decision, at least in the mid-term, is sustainable.

I Write Alone

I write alone, yeah
with nobody else
I write alone, yeah
with nobody else
You know when I write alone
I prefer to be by myself

Every morning just before breakfast
I don’t want no bad company
Just me and good buddy lonesome
That’s all I ever need
‘Cause I write alone, yeah
with nobody else
You know when I write alone
I prefer to be by myself

The other night I laid sleeping
And I woke up with inspiration
So I fired up my trusty Macbook
And I turned off dication
And I wrote alone, yeah
with nobody else
You know when I write alone
I prefer to be by myself

The other day I got invited to a circle
But I stayed offline instead
Just me and my trusty text edit
Spinning up a brand new thread
And I wrote alone, yeah
with nobody else
You know when I write alone
I prefer to be by myself

My fellow bloggers done give up on me
But I don’t feel inadequate
That the only ones hanging out with me
Are my dear old LOLCats
And we write alone, yeah
with nobody else
You know when I write alone
I prefer to be by myself

 

Robbie and the Coupa Factory

Oompa Loompa Doom-pa-dee-do
We’re still building great products for you!
Oompa Loompa Doom-pa-dah-dee
If you are wise you’ll try it for free.

What do you get when you get lots of cash?
Filling coffers and enlarging the stash?
Teams of developers coding like mad!
Making the app work on your iPad.

You’ll like the look of that!

It’s been a long time since Davie ran the Coupa Factory, and while there may have been a number of notable changes in management, one thing hasn’t changed at Coupa — and that’s the original product direction (and the heart of the development team*). Coupa’s goal is still to make the best P2P platform out there that’s so easy to use that even your grandmother and three-year old can use it and get all your spend under management (SUM).

In terms of progress since our last major review of the platform in 2009, which focussed on QuickStart, there has been a flurry of development — of a very interesting sorts. Having built one of the richest web-based P2P platforms on the market in three short years (with everything capable of being custom configured by an administrative user), Coupa made a very important realization — 90% of P2P is simple, straightforward, and limited in terms of required functionality. Find what you need, put in a requisition, get approval, cut the PO to the vendor, accept delivery, accept the invoice, queue it for verification and approval, issue the goods receipt, and make payment within the agreed upon timeframe when the invoice has been verified and the goods accepted. There’s not a lot of inventory management, logistics, payment structuring, etc. in an average corporate purchase made by an end-user outside of the Supply Management organization.

What there is, in fact, is a lot of bypassing of e-Procurement systems that make the process of getting your printer, paper, or widget for your production line more troublesome than going to the Best Buy website, the Office Depot website, or just calling up the supplier and asking for another shipment. So, if you want widespread adoption, which is the key to maximizing your SUM (Spend Under Management), you have to make it at least as easy to use as Amazon. Whether you’re using vendor catalog, punch-out, cXML, or an in-house catalog, searching, shopping, and requisitioning is seamlessly integrated. And it’s all accessible through their new Super Search Bar that seamlessly integrates Google search for what you need, Amazon browse by category, and free-form item/service search (which also allows product/service retrieval through internal or vendor product/service numbers) which can be global, by commodity, category, or vendor — depending on your configuration. Plus, their new dynamic shopping cart, which integrates accounting and budgeting data (so you know against what budget item a requisition will be charged, how much is left on the budget item, and how much will be left when the requisition is approved the minute you add an item to the cat), allows for split-billing and overrides in the cart in a process that is as easy as Amazon’s “one-click” checkout. And, policies can be linked to each item and service that allow for additional information within a search to be “popped-up” so the user can get full information (which can include budgetary and billing information) before an item is even added to the cart. Supplier taxes can be imported and validated against your own tax tables, fending off future nightmares for finance down the road. And when all is said and done, payments can be recorded and integrated with you ERP (and Coupa now supports out-of-the-box integrations with a couple of dozen major ERP and e-Procurement platforms).

Upon checkout, the system will automatically create the necessary requisitions (which will be sent to each individual who needs to approve an item in your master requisition), and, upon approval, the necessary POs for each vendor will be automatically generated and delivered — and all are easily accessible from your order history page with a single click.

The other big developments since our last major review are their Expense Management Solution, which was still in its infancy, and their new Spend Optimizer Solution, which could more accurately called a 360° Spend Visibility solution (which you can use as a starting point in spend analysis and spend optimization). Their Expense Management application is a great way to get your T&E under control (as iPhone integration allows expense reports to be automatically generated by users who simply have to take a picture of their receipt and import it into the application). They’ve taken usability to a new level with this one.

Spend Optimizer is their mega-dashboard reporting solution that is completely configurable and allows for the creation of just about any spend report you can dream up. Done right, you can have it display off-contract spend; late payments; budget overruns; high-spend categories, commodities, and vendors; and other spend hot-spots that could get you or your organization into hot-water down the road if not proactively managed by exception. It’s still a dashboard (which can be dangerous and dysfunctional), but you have the option to see green, see red, or see where the black holes are. It’s this last capability that makes the real difference between useless reporting tool and powerful spend miner, because, generally speaking, off-contract is where the trouble starts.

And brand-spanking new functionality is lined-up for fourth quarter. Their recent announcement that 9.635 Billion has passed through their platform is impressive, but when they pull off their next round of application development, that will be more so. Coupa is still a company to watch, so don’t take your eyes off them for too long.

Oompa Loompa Doom-pa-dee-do
They’re still building great products for you!
Oompa Loompa Doom-pa-dee-dar
They have the goal to take your spend far.

* Dave and Noah may be gone, but David Williams is still there as VP Technology, overseeing day to day development.

There’s Sugar Indices. There’s Steel Indices. Where’s the Exuberance Index?

According to this very interesting article in The Sacramento Bee, the “Global Economy [is] in Worst Shape Since 2009”. Noting that six of the seventeen countries that use the Euro are in recession [including Spain, where protesters are pretending to be V], that the U.S. economy is struggling [yet again], and that the economic superstars of the developing world (namely, the BIC) are in no position to come to the rescue — since they are struggling too, the article claims that this crisis is knocking at all our doors.

But the reality is that crisis, while coming, will not occur until the world accepts it. Economies no longer follow GDP and growth, they follow market exuberance — the kind where housing prices double, where billions are made on junk bonds and collateralized debt obligations, and companies with zero sales get 100 Million valuations, and then go public with massive debt for no apparent logical reason. And it’s not the economic exuberance measured by CERES last year in their “Index of Economic Exuberance” where they tried to measure what’s been happening to whom since the financial crisis of 2008. (In this one-shot analysis, CERES developed a metric to measure whether a country’s macroeconomic performance is stronger or weaker relative to the prevailing performance prior to the advent of the global financial crisis in 2007 using output, unemployment, domestic demand, bank credit, inflation, and the real exchange rate.)

As long as markets are trending up, investment money flows freely. As long as investment money flows, people keep borrowing. As long as people keep borrowing, they keep spending. And as long as they keep spending, the economy goes up, even if production is falling, unemployment is high, and the cost of living is skyrocketing. And if the feds keep pumping money into the economy, the press keeps painting a rosy picture, and corporations take efforts to keep prices down, the economy can keep chugging along at an upward pace for months, and in the past, even a year or two, after everything should come crashing down. (The Zeroes proved that!)

Robert J. Shiller tried to capture the underpinnings of this phenomenon in his book, Irrational Exuberance, first published in 2000, and then revised in 2006, but even behavioural economics, in its current state, can’t capture the absurdity of what drives today’s market-driven economies.

But a technology may be near at hand. In the marketing domain, we have a new technology called sentiment analysis which uses NLP (natural language processing), CL (computational linguistics), and text analytics to identify and extract subjective information in source materials. Enabled by technologies such as the AlchemyAPI, which attempt to identify positive or negative sentiment within any block of text, the goal of sentiment analysis is to determine the attitude and tone of a document.

If we could apply such technology to all market analysis and market sentiments from investors, media, and influential self-publishers (journalists, analysts, and bloggers), it might be possible to see how the markets are moving and detect not only exuberance, but irrational exuberance. This is not as far fetched as it seems. As per an article in the MIT Technology Review in late 2010, the (gasp!) “Twitter Mood Predicts the Stock Market” (and since stock markets are among the primary drivers of economies, it’s a great start). According to the article, research conducted by Johan Bollen and colleagues determined, with an analysis of almost 10 Million Tweets from 2008 on, that stock market movements could be predicted with this data up to 6 days in advance! (Using a calmness index, they found an accuracy of 87.6% in predicting the daily up and down changes in the closing values of the Dow Jones Industrial Average. That’s a success ratio that will make your average trader blush!)

Twitter data alone would not be enough, but as we are better able to harness distributed computing power and the limits of Big Data approach the realms where even Chess becomes a solvable problem, analyzing all market related data for a day will become possible, and maybe we will be able to create an exuberance index and get a better grip on when a recession, even if overdue, will be upon us. (And then, as Supply Managers, determine the best times to sign contracts, lock in prices, and guarantee supply.)

New Trend! Globalization!

Today’s post is from Dick Locke, Sourcing Innovation’s resident expert on International Sourcing and Procurement.

Over at a blog called pool4tool the company (apparently an Austrian company with large clients) alerts its readers of opportunities in globalizing. It also talks of the breakthrough concept of Total Cost of Ownership and holds “Boeing’s outsourcing of Dreamliner design and construction” (Supply Chain Digital) as a success story. Strange alternate universe over there in Austria.

Film at 11.

Rant on, Dick, Rant on! (Global Supply Training)