Monthly Archives: June 2006

The Operations Research Process

Operations Research is “the use of mathematical models, statistics and algorithms to aid in decision-making. It is most often used to analyze complex real-world systems, typically with the goal of improving or optimizing performance. It is one form of applied mathematics.” (Wikipedia)

The quest for improvement has been a continual one and operations research has been one of the areas that has been traditionally focused on improving operations across the company, particularly in production, operation, scheduling and physical systems.  As such, there is a wide body of knowledge upon which can draw to improve procurement and sourcing operations when properly applied and modified.  Even Six Sigma’s (Strategic Sourcing) toolbox makes extensive use of techniques and processes that have their foundations in operations research.

But today we are going to talk about the basic process.  There are many good overviews of operations research on the internet, but one of the best sites I found was the “Operations Research Models and Methods” site (formerly at http://www.me.utexas.edu/~jensen/ORMM/) that was maintained by Dr. Paul Jensen at the University of Texas.  On the site, he overviewed the basic Operations Research Process, which, simply put, is:

(1) Recognize the Problem
(2) Formulate the Problem
(3) Construct a Model
(4) Find a Solution
(5) Define the Process
(6) Implement the Solution
(7) Repeat and Refine

Essentially, the operations research process is your basic problem solving process, like the introductory problem solving process you might encounter if you were studying (cognitive) psychology, the art of mathematics, or (classical) engineering.  Furthermore, it neatly captures the key steps you will have to work through as you attempt to improve and evolutionize your sourcing process.

(1) You first have to define what your primary problem is and what your key goals are.  Are you spending too much money?  If so, where.  Are you spending too much time on the process?  If so, why?  Etc.

(2) Then you have to formulate and frame the key problem.  For example, you believe you’re spending too much on your high volume direct materials or you are spending too much time in your data collection process.

(3) Once you have precisely formulated the problem to solve, you need to model what you believe the solution should look like.  Many individuals and organizations skip this step and go straight to the solution identification step.  However, if you don’t know what the solution should look like, you risk selecting the wrong solution.  For example, if you believe you are spending too much, you might select a (reverse) e-Auction platform.  However, if current raw commodity prices are high, this might not save you any money.  Conversely, if you instead sought out a strategic supplier who would work with you to improve processes and component reusability, you might save a bundle.  Always understand what the solution should look like and what it should accomplish before selecting a solution.

(4) Often this step will be accomplished in practice by selecting a readily available technology, methodology, process, or model from the public domain or commercial marketplace.  Don’t try to reinvent the wheel, chances are your problem is not unique and someone else has already solved it for you.  For example, the inventor and followers of TRIZ (an innovative problem solving methodology that we will discuss at a later time) have collectively reviewed over 2 million patents and discovered that less then 4% contained a new concept and only 1% contained a revolutionary discovery.  The rest were merely improvements on existing solutions and processes.  In other words, there is at least a 95% chance that a solution to your problem already exists, and at least a 99% chance that a solution to a similar problem exists that can be adapted to your problem.

(5) Once you have a selected a solution — be it a technology or a new methodology, you need to define how it is going to be integrated into your current operational processes.  This step is easy to overlook, but if the introduction of a new process or technology disrupts your daily operations, you will not realize the full benefits.

(6) Once you have identified the right solution and determined how to successfully integrate it into your operational processes, you need to implement it and reap the rewards.

(7) Finally, you need to monitor the process, measure the improvements, and look for ways to continually improve it.  Innovation is a continual activity.  There’s always room for improvement, but if you do not look for it, I guarantee you will not find it.

We’ll discuss other problem solving methodologies in the future, including some from psychology, innovation, and the Six Sigma toolbox, but first we are going to review the core executable parts of the sourcing cycle where technology solutions can have the greatest impacts to set the stage for what is to come.

Comments? Criticisms? Creative Insights?  Email us at the contact information in the FAQ.

Strategic Sourcing Innovation Defined

What is Sourcing Innovation all about?

Let’s start with some definitions.

Sourcing: The process of identifying, conducting negotiations with, and forming supply agreements with suppliers of goods and services.

Strategic Sourcing: The formal process of selecting suppliers to supply products and services using sourcing best practices.

Innovation: The act of creating a new invention which may take the form of a product, process or service.

Strategic Sourcing Innovation: The process of creating and implementing new and improved sourcing procedures, processes, and technologies using best practices and experience to support and yield more valuable supply relationships.

So, what do these transformations look like?  Anything from replacing manual paper-based processes with automated e-Sourcing systems to redesigning your supplier selection processes to insure that you have sufficient geographic variation in your tier 2 and tier 3 supply chains to insure that a natural disaster does not wipe out your supply.

So how do these transformations come about?  Fortunately, despite what many agencies and consultants still might have you believe, it does not take magic, miracles, or one of those rare blinding flashes of insight to innovate.  Hard work, careful analysis, knowledge, education, and experience will produce fantastic results … with the right process.

So what does this process look like?  Well, unfortunately there is no single universal process that will work every time, but there are a number of generic processes that point you in the right direction and customizations that get you pretty close.  Once you are close, your brain (should you choose to use it) — still infinitely more powerful then any piece of software ever developed — will take you the rest of the way.  One of the things we will do in this blog is examine these processes, and associated customizations and tools, on a regular basis because the reality is, the more of these processes you have in your tool kit, the more successful you will be.

First up, an overview of an operations research model building process.  Why?  Stick around and find out!

Again, feel free to leave a comment or e-mail me.

 

Welcome

Welcome to the unofficial launch of Sourcing Innovation (on June 9, 2006), a new blog about … sourcing innovation.  On launch, this blog was designed to complement other leading supply chain blogs on the internet, including Spend Matters (http://www.spendmatters.com/) by Jason Busch, E-Sourcing Forum (defunct, see the archives on the WayBackMachine) by David Bush, and Procurement Central (defunct) by Dave Stephens by focusing on innovation from the perspective of a former developer and architect of sourcing and supply chain software.

 

My name is Michael G. Lamoureux, and I am a CS PhD who spent most of the first part of the noughts working on supply chain and sourcing applications and most of the late nineties working in the more general e-commerce space.  (Before that, I was in the academic realm, which included some teaching and research post-graduate degrees.)  I have deep expertise in data structures, computational geometry, optimization, and modeling (mathematical and data), but I have heard the call of Strategic Sourcing and now believe that Procurement will be the center of the next phase of organizational transformation.  Hence this blog and my newfound focus on SCM (Supply Chain Management) and SCM consulting.

Whereas, in my view, Spend Matters was your leading source for breaking supply chain news, E Sourcing Forum was your leading source for best practices and interesting tidbits you won’t find anywhere else, and Procurement Central was your leading source for insightful technology management principles and insights from the mind of a former sourcing project manager, the goal is for this blog was to focus more on innovative processes and technologies that you can use to evolutionize your sourcing organization.  This doesn’t mean that there won’t be a strong overlap of topics between this blog and the ones herein mentioned, and I sincerely hope there is not only an overlap but regular debates so that you get the full story, but that my topics and viewpoints will be approaching sourcing from a problem solving and innovation angle first and a more traditional sourcing angle second.  I also intend to broach more side issues to give you an overview of the larger business space in which sourcing exists and the technology that exists, or will soon exist, to help you solve your problems.

Check back regularly for postings and, of course, for the official launch.  Also check Spend Matters and E Sourcing Forum where I have been known, and hopefully will continue, to make comments and maybe, just maybe, the occasional guest post (if I get lucky).  (And I truly hope that if this blog takes off, Jason, David, Dave, and other leading bloggers will accept my forthcoming invitations to guest post as well.)

Feel free to comment or email at the contact information in the FAQ!

Live the evolution!

About Sourcing Innovation

Sourcing Innovation is a resource for sourcing, procurement, and supply chain professionals who are interested in improving themselves and the overall performance of their organizations. Sourcing Innovation is education about, in-depth analysis of, and subjective opinion on technologies and approaches that can have a profound impact on the way you do business. The editor believes that the more you know, the better your chances of success.

That’s why Sourcing Innovation brings you in-depth technology and vendor analyses, reviews and analysis of some of the more important articles and white-papers that pop-up from time to time, as well as best practices and deep dives into specific solution areas. Sourcing Innovation also explores key issues that you need to be aware of as a sourcing professional.

However, use of this blog and any content on means that you accept all of the editorial disclaimers, licenses, and copyright requirements associated with this blog.  You also accept this is a free resource for personal, non-commercial, use for educational, informational, and entertainment purposes only!  No warranties, express or implied, are provided on the accuracy, completeness or adequacy of such information and Sourcing Innovation shall have no liability for errors, omissions or inadequacies in the information contained herein or for interpretations thereof.

You also accept that while Sourcing Innovation will cover, and provide opinions on, companies, solutions, platforms, and/or products, Sourcing Innovation is NOT making a recommendation for or against any specific company, solution, platform, and/or product.  It is merely providing one data point that may be used in your consideration, at your own risk, and any recommendations it provides are for situations in which it would consider or not consider the company, solution, platform, and/or product for a shortlist.  (i.e. it would include, or not include, the company, solution, platform, and/or product based on a specific scenario)

Sourcing Innovation, was started in June of 2006 to dive deeper into technology, processes and core issues than the average blogger and analyst (who tends to come from a business background in marketing, management, solutions consulting, or system implementation, and is therefore unable to comment as credibly on underlying technology) than other sites that existed at the time.

A second primary goal of this blog tis o raise awareness of innovative best practices and technologies that are relatively unknown but that could be used by a large number of organizations to elevate their performance as a whole. When one combines the impending talent crunch with the rapid rise of developing nations like China and India, innovation takes on a whole new importance, since it might be the only way North America, Western Europe, and other developed nations will be able to compete in the coming decades. When this blog was started in 2006, we were seeing rapid rise in energy and raw material prices globally which was followed by the rapid fall of the US dollar in 2007 and the 2007-2008 financial crisis; and while the situation improved, there were still many bumps along the way from 2009 through 2019 and then 2020 saw the world shut down when China shut down during COVID, and just as supply chains started to normalize we saw Panamanian droughts and conflict in the Red Sea, continuing the global sourcing nightmares which have now been ongoing for over 4 years (as of July, 2024). In other words, every time global business resolves a fork in the road, yet another one appears, and only the organizations that continually innovate will be able to find the path that leads to continued success.

Sourcing Innovation was designed to be one of the focal points for the sourcing community with steady technology and process coverage. A large number of blogs have come and gone over the last couple of decades, and at any given time it’s hard to know who’s blogging, on what topic, and where the thought leaders have gone.In the past, Sourcing Innovation regularly organized cross-blog posting series that focused on important, key topics and regularly invited the thought leaders to guest post.  (To date, Sourcing Innovation has successfully tackled The Future of Sourcing, The Top Three, and Sustainability and has brought together between one dozen and two dozen leading bloggers and thinkers on each topic as well as attracting around 100 of the space’s thought leaders to its virtual pages.) Today, it updates its blog list at least annually and occasionally invites leading experts to contribute.

Sourcing Innovation also injects a sense of humour, usually lyrical in nature, on topics of interest.

Finally, as mentioned above, Sourcing Innovation is not afraid to express an opinion (purely subjective and should not be taken as fact) and rant on a topic.  (But please note rants are on topics, processes, industry directions, class of entities, solution types, etc. and other generalities.  Rants are not on specific vendors or people.  If you believe otherwise, you are wrong.  As mentioned above, regardless of the view expressed on a company or solution, Sourcing Innovation is not providing a recommendation for or against, as every situation is unique and Sourcing Innovation never knows all of your specific details.)

For more information on Sourcing Innovation, please check out the posts in the About Category. You might also want to check out Where Is My Market Going?.

For more information on the doctor, you might want to check out What Does the doctor Do? and What Does the doctor Do? For Executives.

For more information on becoming a corporate sponsor, and influencing the influencers, you should check out Why I’m Going To Sponsor SI! and The SI Open Pricing Model.

To contact the doctor, see the contact information in the FAQ.

( spam@sourcinginnovation.com)

The MBA Rules of Acquisition

Since the dawn of the MBA, there have been unwritten rules of acquisition that all MBAs that become sales and revenue focussed live by. They’re known only to MBAs, and Star Trek fans who secretly know that the Ferengi rules of acquisition are actually based on these unwritten rules — obviously created by a failed MBA turned screenwriter who was looking for a shortcut to develop the Ferengi race backstory.

So that you as a Procurement professional can better understand what rules the MBA salesmen trying to sell you something (unsolicited) live by, we are collecting all the rules we know of and storing them here. We’ve updated a few of them to be pseudo-politically correct where possible, but in many cases it’s not. One has to remember that the originals were very chauvenistic, since the first MBA degrees were awarded in a time when business was male-dominated and the male-domineers wanted to keep it that way. Moreover, in many countries, Sales (like Procurement) is still dominated by aging white men (who likely still live by many of these rules).

For those of you interested in their Ferengi equivalent, please see the Memory Alpha Star Trek Wikia.

1 “Once you have their money, you never give it back.”
2 “The best deal is the one that makes the most profit.”
3 “Never spend more for an acquisition than you have to.”
4 “A woman wearing a suit is like a man wearing an apron.”
5 “Always exaggerate your estimates.”
6 “Never allow family to stand in the way of opportunity.”
7 “Always keep your ears open.”
8 “Small print leads to large risk.”
9 “Opportunity, plus instinct, equals profit.”
10 “Greed is eternal.”
11 “Even if it’s free, you can always buy it cheaper.”
12 “Anything worth selling is worth selling twice.”
13 “Anything worth doing is worth doing for money.”
15 “Dead men close no deals.”
16 “A deal is a deal (is a deal)…until a better one comes along.”
17 “A contract is a contract is a contract… but only between fellow MBAs (from the same [secret] society).”
18 “An MBA without profit is no MBA at all.”
19 “Satisfaction is not guaranteed.”
20 “He who dives under the table today lives to profit tomorrow.”
21 “Never place friendship before profit.”
22 “Wise men can hear profit in the wind.”
23 “Nothing is more important than your health…except for your money.”
27 “There’s nothing more dangerous than an honest businessman.”
29 “What’s in it for me?”
30 “A wise man knows that confidentiality equals profit.”
31 “Never make fun of an MBA’s mother.”
32 “Insult something the customer cares about.”
33 “It never hurts to suck up to the boss.”
34 “War is good for business.”
35 “Peace is good for business.”
37 “The early investor reaps the most interest.”
39 “Don’t tell customers more than they need to know.”
40 “She can touch your manhood but never your money.”
41 “Profit is its own reward.”
43 “Feed your greed, but not enough to choke it.”
44 “Never confuse wisdom with luck.”
45 “Expand or die.*”
47 “Never trust a man wearing a better suit than your own.”
48 “The bigger the smile, the sharper the knife.”
52 “Never ask when you can take.”
53 “Never trust anybody taller than you.”
54 “Rate divided by time equals profit.”
55 “Take joy from profit, and profit from joy.”
57 “Good customers are almost as rare as gold … treasure them.”
58 “There is no substitute for success.”
59 “Free advice is seldom cheap.”
60 “Keep your lies consistent.”
62 “The riskier the road, the greater the profit.”
63 “Work is the best therapy-at least for your employees.”
65 “Win or lose, there’s always cuban cigars.”
66 “Someone’s always got a better sense for business.”
69 “MBAs are not responsible for the gullibility of others.”
74 “Knowledge equals profit.”
75 “Home is where the heart is, but the silk road is paved with gold.”
76 “Every once in a while, declare peace. It confuses the Hell out of your enemies.”
77 “If you break it, I’ll charge you for it!”
79 “Beware of the scientist’s greed for knowledge.”
82 “The flimsier the product, the higher the price.”
85 “Never let the competition know what you’re thinking.”
87 “Learn the customer’s weaknesses, so that you can better take advantage of him.”
88 “It ain’t over ’til its over.”
89 “Ask not what you can do for your profits, but what your profits can do for you.”
92 “There are many paths to profit.”
94 “Females and finances don’t mix.”
95 “Expand or die.*”
97 “Enough…is never enough.”
98 “Every man has his price.”
99 “Trust is the biggest liability of all.”
100 “When it’s good for business, tell the truth.”
102 “Nature decays, but gold bricks last forever.”
103 “Sleep can interfere with … profit!”
104 “Faith moves mountains…of inventory.”
106 “There is no honor in poverty.”
109 “Dignity and an empty sack is worth the sack.”
110 “Exploitation begins at home.”
111 “Treat people in your debt like family… exploit them.”
112 “Never have sex with the boss’ sibling.”
113 “Always have sex with the boss.”
121 “Everything is for sale – even friendship.”
123 “Even a blind man can recognize the glow of gold.”
125 “You can’t make a deal if you’re dead.”
135 “Listen to secrets, but never repeat them.”
139 “Wives serve; brothers inherit.”
141 “Only fools pay retail.”
144 “There’s nothing wrong with charity… as long as it winds up in your pocket.”
147 “People love the bartender.”
153 “Sell the sizzle, not the steak.”
162 “Even in the worst of times, someone turns a profit.”
168 “Whisper your way to success.”
177 “Know your enemies … but do business with them always.”
181 “Not even dishonesty can tarnish the shine of profit.”
183 “When life hands you lemons, make lemonade.”
184 “An MBA waits to bid until his opponents have exhausted themselves.”
188 “Not even dishonesty can tarnish the shine of profit.”
189 “Let others keep their reputation. You keep their money.”
190 “Hear all, trust nothing.”
192 “Never cheat a War Lord … unless you’re sure you can get away with it.”
193 “Trouble comes in threes.”
194 “It’s always good business to know about new customers before they walk in your door.”
199 “Location, location, location.”
200 “An MBA chooses no side but his own”
202 “The justification for profit is profit.”
203 “New customers are like blowfish. They can be succulent, but sometimes they poison you.”
208 “Sometimes, the only thing more dangerous than a question is an answer.”
211 “Employees are the rungs on the ladder of success, don’t hesitate to step on them.”
212 “A good lie is easier to believe than the truth.”
214 “Never begin a business transaction on an empty stomach.”
216 “Never gamble with a better poker player.”
217 “You can’t free a fish from water.”
218 “Always know what you’re buying.”
218b “Sometimes what you get free costs entirely too much.”
219 “Possession is eleven-tenths of the law!”
223 “Beware the man who doesn’t take time for physical pleasure.”
227 “If that’s what’s written, then that’s what’s written.”
229 “Gold lasts longer than lust.”
235 “Duck; death is tall.”
236 “You can’t buy fate.”
239 “Never be afraid to mislabel a product.”
240 “Time, like gold, is a highly limited commodity.”
242 “More is good…all is better.”
243 “Always leave yourself an out.”
255 “A wife is [a] luxury… a smart accountant [is] a necessity.”
257 “When the messenger comes to appropriate your profits, kill the messenger.”
261 “A wealthy man can afford everything except a conscience.”
263 “Never let doubt interfere with your lust for gold.”
266 “When in doubt, lie.”
272 “Always inspect the merchandise before making a deal.”
280 “If it ain’t broke, don’t fix it.”
284 “Deep down, everyone’s a greedy MBA.”
285 “No good deed ever goes unpunished.”
??? “Always get somebody else to do the lifting.”
??? “Never get into anything that you can’t get out of.”
??? “A man is only worth the sum of his possessions.”
??? “An angry man is an enemy, and a satisfied man is an ally.”
??? “The less employees know about the cash flow, the smaller the share they can demand.”
??? “Only a fool passes up a business opportunity.”
??? “The more time they take deciding, the more money they will spend.”