Monthly Archives: August 2010

Would You Go To Work If Cockroaches Ruled Your Office?

If you looked up and saw this, would you put up with it?

And if you saw this swarm of locust coming toward you, would you stay put and let them swarm all over you?

What about a swarm of killer bees? Would you still just sit there?

I’m guessing the answer is no, hell no, and get me the flamethrower!

So why are you still letting spreadsheets run your life?

Given that 80% and 90% of spreadsheets contain serious non-trivial errors, that could cost you millions, and land your corporate officers in legal jeopardy, you should be doing everything you can to remove these pests, which can be said to be the technological equivalent of cockroaches, from your company. You should not be treating them as your most beloved pet. Like capuchins and pit bulls, these deadly critters can turn on you.

Needless to say I was foaming at the mouth when I saw this recent article over on CIO that said BI Vendors Finally Embrace the Spreadsheet. Simply put, if the tool is attempting to unlock, extract, and aggregate data from an uncontrolled proliferation of spreadsheets, it’s not business intelligence. Spreadsheets are about as unintelligent as you can get. It’s one thing to allow input through and export to a spreadsheet (as spreadsheets are good for initial capture of matrix friendly data and for users who want to toy around with a copy of the data without corrupting the data store), but it’s another thing entirely to think you can extract life from a plague of spreadsheets. Plagues kill!

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Want More Business?

Put Employees First!

I was absolutely thrilled to see this recent article over at Knowledge @ Wharton India that said that “Winning More Business in a Recession Means Putting Employees First”. In the interview with Vineet Nayar, CEO of HCL Technologies — a company which grew 21% year over year in operating profit and revenues, he noted that their customer satisfaction rate rose 43% and that they were rated #1 in employee satisfaction. Simply put, a happy employee goes the extra mile to make customers happy. And a happy customer is much more likely to buy again than one that isn’t.

‘Nuff said. But if you want more, you can read the 5 page article.

A Hitchhiker’s Guide to e-Procurement: Reconciliation, Part II

Mostly Harmless, Part XIII

Previous Post

In the last post, reconciliation was defined as the process of comparing and matching figures from the accounting records of one system with the accounting records of another system. This meant that records in the system not only needed to match up, but match any associated records in the inventory system, the human resources system (if temp labor was procured), and the records in the supplier systems. This often requires a number of challenges to be overcome. This post will address some of the challenges of reconciliation, some associated best practices, and a few of the benefits that could be expected from an appropriate e-Procurement solution.

Common Challenges

  • Manual SKU Assignment

    If a line item can not be automatically matched with a purchase order line item and a corresponding price, then it can be difficult to match an item with the proper item in the buyer’s system.

  • Overpayment Identification

    As explained in the previous post, sometimes overpayments will slip through the most controlled system, especially if it’s difficult to match a conditional discount against a line item or if a contract is late being entered into the system.

  • Tax Verification

    Is the tax rate correct? Are the items being taxed subject to taxation? Is the organization exempt? Is the organization eligible to recover (part of the) tax payment? These can all be difficult questions to answer.

Best Practices

  • Flagging of Manual Assignments

    The system should automatically flag any manual assignment, and queue any manual assignments above a certain value for supervisory review.

  • Automatic Identification of Potential Overpayments

    The system should automatically identify any off-contract payments for goods and services that relate to existing contracts with suppliers in case the goods or services were covered by general discount clauses or in case the opportunity arises to negotiate them into a (future) contract revision.

  • Automatic Tax Rate Verification

    The system should automatically verify that the tax rates used are correct, that each tax the organization knows it has to pay is included, and that any taxes it gets to reclaim are appropriately flagged.

Potential Benefits

  • Overpayment Detection and Recovery

    Good reconciliation support will increases the number of overpayments that are detected and increase the chance of full and timely recovery.

  • Tax Recovery

    Good reconciliation support will increase the chances that recoverable tax payments are identified.

Once the reconciliation phase is complete, it is time to reclaim any tax payments to which the organization is due, which is the subject of a future post.

Next Post: Payments

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Six Drivers of a Successful Supply Chain Strategy

In addition to offering insights into planning horizons and supply chain strategy drivers, the recent report on “Supply Chain Strategy in the Board Room” by the Cranfield School of Management and Solving Efeso also summarized six drivers of a successful supply chain strategy. While there were no surprises, the points do deserve reiterating.

  • A balanced input of vision. A strategy developed without the blinders on generally works better than one developed with the blinders on.
  • Frequent review. When there’s a regular review to insure the strategy is being followed and implemented properly, the strategy will tend to be more successful.
  • Balanced input of quantitative modelling. Decisions based on a consideration of facts tend to be better than decisions made solely by gut instinct.
  • Adaption.What gets adapted gets implemented.
  • Integrated risk management. A supply chain that is less prone to collapse tends to function better than one that is more prone to collapse.
  • Benefit tracking. What gets measured gets managed is a timeless truth.

It would have been nice to see more insightful drivers considered, but c’est la vie. The reality is that if every company made these six drivers part of their supply chain strategy checklist, the average supply chain would function much better than it does today.

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A Couple of Surprises in the Supply Chain Strategy Survey

A cooperation between the Cranfield University School of Management and Solving Efeso that resulted in the publication of Supply Chain Strategy in the Board Room (based on a survey of 181 senior logistics and supply chain executives) between July 2009 and January 2010) had a couple of surprises in the top ten findings, at least to me.

While the following findings made sense:

  • The most important supply chain performance drivers are cost focus, customer lead-time and customer quality but these vary by sectorUnfortunately, supply chain initiatives are still primarily focussed on cost and not the overall value supply chain can deliver in terms of risk mitigation, service level improvements, and innovation.
  • Customer service issues and cost issues are the main triggers for strategy reviewReviews are usually reactive and not proactive.
  • Supply chain strategy implementations are not straightforwardThe supply chain affects all areas of the business and multiple systems in sourcing, procurement, logistics, warehouse, and trade management are needed to address the supply chain end-to-end.
  • Successful supply chain strategy implementations have top level supportGreat results typically require significant changes to systems and processes, which just don’t happen without support and leadership from the top.
  • Cross-functional accountability and a balanced combination of several key approaches and techniques also improve the likelihood of successAll of the affected parties need to collaborate. This will generally only truly happen if they are all held responsible for the success or failure of the initiative.
  • Development of the supply chain strategy is largely internalisedEven though most corporations don’t truly understand how to revolutionize the supply chain, those that embark upon defining a supply chain strategy generally try to do it themselves without the help of an expert guide from outside the organization (even though Consultants are Cheap).
  • Of the many barriers to success, the major ones are company culture, lack of leadership and poor supply chain visibility. Barriers are predominantly people-related, rather than technical.Implementations may be difficult, but with the right guidance, support, and elbow grease, they can be done relatively quickly and efficiently and, depending on the system or process in question, sometimes be completed in a few weeks. Most of the solutions are fairly matures these days. As a result, any hiccups are generally caused by humans and not hardware.

The following findings are a little shocking:

  • Supply chain is recognised as an important part of the businessWhile I hear a lot more talk these days about how important supply chain is to the business, I still don’t see a lot of action. It’s shocking how many mid-market companies still don’t have basic e-RFX/e-Auction platforms even though affordable solutions have been available for years! As far as I’m concerned, it’s Action, Not Words, and until I see more action, I won’t believe it.
  • Service and corporate strategy are key driversNo, cost is. While 10% of the true innovators might have moved onto service and strategy in an attempt to generate long term value, 90% of the time it’s cost, cost, cost. (If you get any other response is just lip-service.) While it should be value, it’s still cost.
  • Review of supply chain strategy is highly cross-functional and in many cases, a continuous process with regular monitoring and continuous adaptation according to circumstancesWell, at those few companies that actually have real supply chain strategies, review is likely to be cross-functional (as these are the few companies where the CSCO/CPO will actually have a seat at the table), but at the vast majority of companies monitoring is irregular, adoption is haphazard, and cross-functional participation is still a pipe-dream. Sorry, but this is either wishful thinking on the part of the survey respondents, or the survey sample was very skewed towards the 10% of true innovators. If review and monitoring was continuous, you wouldn’t have 40% to 60% of negotiated spend unrealized at the average company, because maverick spending would be caught and eliminated, overcharges would be caught and never paid, and off-contract shipping options avoided in all but true emergencies.

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