Monthly Archives: August 2010

Is there a T in BPM?

Today’s guest post is from Sudy Bharadwaj, ex-analyst extraordinaire of the Aberdeen Group, former VP of MindFlow, former CMO of Informance, and, most recently, a star at Inovis.

I don’t get it. I have been involved in numerous business process improvement projects over the past 20 years. I have been in numerous meetings about “business process management”. I’ve read white papers and looked at discussion groups. In way too many cases, very early in the conversation, a business process discussion gets down and dirty into integration processes, XML and other related technologies. At a certain point in time, a technology discussion becomes necessary and important, but not early in a BPM initiative. Here is my vote — don’t get techie in a business process discussion. The point is to review, understand and diagram your business process.

Here are some quick guidelines I have pieced together over the years for various business process improvement initiatives:

Engage in a discussion. With respect to Global 2000 executives in particular: discuss your business process internally before you engage an outside vendor, be it a consulting or technology company. If you want to use a technology, use a white board and markers. After a thorough understanding of the process, only then should modern technology be used, and even then the first piece of modern technology employed should only be used to capture the process flow. In other words, you start with something like PowerPoint or Visio. If the organization is large and/or distributed, you might also leverage social networking and collaborative tools, such as wikis, to engage a larger team and obtain input into what your business process actually looks like. Social networking is a great tool to garner input and gain consensus on what a business process looks like, since the challenges of including a large, extended and distributed team is greatly simplified.

Don’t get myopic. Many business processes are cross-functional and extend beyond the walls of your own enterprise. Don’t let those boundaries affect the improvement initiative. Many times, a business process is only as good as its inputs (garbage-in/garbage out). Make sure you understand your inputs/outputs, and in some cases, it is not wrong to extend beyond your own scope of control to better understand and diagram the process. This can be a delicate process, so it may not be for everyone, but if you can engage externally and collaboratively, your results can improve.

Use common phrases and definitions. One way to get team members to understand and define the process better is not to use internal acronyms. Try using industry terms and/or terms you would use to explain a concept at a party. If this is a customer-facing business process, explain it in terms of benefits to your customers. A supplier-facing initiative, benefits to suppliers. By struggling to obtain new phrases/definitions, you will gain insight and, more importantly, challenge the establishment (“now that I say it that way, why do we do it that way?”) — a great 1st step in developing the improvement plan.

To summarize, engage your team, both a core team and an extended team, in defining your process, get it on paper (or electronic form) and have everyone agree that this is at least close. I have seen organizations who engage technology vendors about a business process realize that they did not truly understand the business process. It can get very amusing to watch executives learn about their own business and get insight from putting the business process on the table (hey — how about that for the “t” — the table).

Want to get creative? One business improvement initiative I was involved in actually fined members of the team for using technology acronyms and even internal names. We fined them $1.00 each. I donated $2.00 myself and the pot got as high as $14.00 — that got us an appetizer at dinner that evening!

Thanks, Sudy.

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A Hitchhiker’s Guide to e-Procurement: Catalogs & Contracts, Part II

Mostly Harmless, Part XX

Previous Post

The last post defined catalogs and contracts and discussed reasons why they will need to be revisited and revised on a regular basis. As promised, this post will address the associated challenges of catalog and contract maintenance, some associated best practices, and the benefits that could be expected from an appropriate e-Procurement solution.

Common Challenges

  • Unused Item/Contract Identification

    Catalogs are continuously updated and procurement constantly negotiates and renegotiates contracts. However, how many of the items are ever bought and what percentage of the contracts are used for more than a short time?

  • New Item Identification

    What items were bought this month/quarter that were never bought before? Which are not associated with a contract or an approved catalog?

  • Similar Item Identification

    For those items which are not on contract, were there similar items on contract that would have sufficed? If not, were there at least similar items in approved catalogs that would have worked?

Best Practices

  • Automatically Flag Items Not on Contract and Force Supervisory Review

    The best way to reduce maverick spend is to prevent it from happening in the first place. Forcing a supervisor to review all purchases not on contract (above a certain dollar limit or for products / categories there are contracts for) can put a significant dent in contract spend.

  • Automatically Flag Items Not in the Catalog and Force Procurement Review

    Not everything will be on contract, but there’s no reason that the majority of goods and services that the organization needs to buy on a regular basis can not be in the catalog. Unless the item is brand new, it should be in the catalog if it is needed. Forcing Procurement review will minimize the purchase of off-catalog items where price, and associated spending levels, are unmonitored and where pricing could spiral out of control.

  • Automatically Identify Items in Contracts and Catalogs that Have Not Been Purchased in the Last Month, Quarter, Year

    New items need to be tracked and monitored as any new items bought in quantity on a regular basis are prime candidates for future contracts.

Potential Benefits

  • Improved Contract Compliance / Reduced Maverick Spend

    The automatic flagging of off-contract and off-catalog purchases for manual review and approval can greatly increase contract compliance while simultaneously reducing maverick spend.

  • Easy Identification of Additional Savings Opportunities

    The automatic identification and tracking off off-contract items and associated volumes can identify some of the best opportunities for future savings opportunities.

Once the catalogs and contracts are up to date, it is time to begin the cycle anew. The next post will move on to how to cost a solution.

Next Post: Costing a Solution

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Where is Your Company on the Transformation Curve?

A recent article over on strategy+business on why it makes sense to adjust did a great job of outlining why business transformation needs to be a continuous process. Now that operating in a more volatile, less predictable environment has become a way of life, companies must be ready to repeatedly transform themselves. If the company can not respond to new challenges with a broad-based, enduring plan , it may soon be left in the dust by its competitors.

But most companies can’t do this, because they don’t have an adequately proactive road map for transformation. Instead, they attempt change on the fly, reacting to business disruption with equally explosive responses that may not be useful six months down the road or even sooner. On the transformation curve, they are stuck at the bottom in the reactive stage, when they need to be at the top of the curve in the sense-and-adjust stage.

A company that is reactive employs minimal seat-of-the-pants transformation strategies with little cross-company coordination or follow-up. Such strategies are not only limited, but unsustainable.

A company that moves up the curve becomes programmatic and takes more comprehensive approaches when major changes are required and the company has sufficient lead time. These approaches include thought-out widespread change initiatives across the lines of business that are most affected. Such programs — that include tactics, milestones, and executive assignments — can be quite effective in dealing with contained threats, such as new competitors or new rival products, but fall apart when the threats are not contained and well understood in advance.

But a company that reaches the top of the curve is able to sense-and-adjust. This continuous long-term strategy allows a company to constantly and consistently smooth out volatility in areas of business subject to swift and dramatic change. This is important in turbulent times.

And very important if a company is to have a successful supply chain, which not only has to deal with a tumultuous and unpredictable market, but also has to deal with risks of every colour and flavour, which pop into existence when and where they are least expected. Does your company sense and adjust? Is your supply chain ready?

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What’s the Right Planning Horizon for Your Supply Chain?

The recent report on “Supply Chain Strategy in the Board Room” by the Cranfield School of Management and Solving Efeso had some interesting and surprising statistics on the frequency of supply chain strategy review and the supply chain planning horizon. Namely, while the frequency of review was all over the place and ranged from less than a year at some companies to over 3 years at others, with an average of approximately 1.25 years for the electronics industry and 2.70 years for the heavy machinery industry, with the exception of APAC, the average planning horizon was between 3 and 4 years, and with the exception of the automative industry (which had an average planning horizon of 5 years), the average planning horizon was almost exactly 4 years across all of the other industries. That’s right, the average planning horizon for construction, heavy industry, electronics, consumer goods, chemicals, textiles, pharma, retail & distribution, and food & beverage was 4 years.

If empirical evidence is to be taken as truth, than this would suggest that 4 years is the right planning horizon for your supply chain. But is it? While the organization does need flexibility and the ability to change direction quickly if the market shifts, does that mean the entire supply chain needs to be reinvented every 4 years?

Product life-cycles are shorter than they used to be, but will the organization be producing completely different products in only 4 years? Or simply bigger, better, badder versions of the current product. At an industry level, most product categories have lifespans of decades … or longer. The basics offerings in any electronics category don’t change that often. CRT TVs lasted decades. Cell phones were primarily analog for about a decade. Than they were primarily digital for another before the modern smartphone came along, which will probably not change much (except with respect to the feature/function/performance classifications) for another decade. The technology for packaging food and making clothes changes very little from decade to decade. Even if the products themselves change rapidly, the production technologies change slowly and the dominant suppliers tend to retain dominance for years and relevance for over a decade, if not two. If a supply chain is properly designed, there’s no reason to think that the fundamentals will have to change every few years.

Furthermore, isn’t a long term strategic planning supposed to look forward five to ten years into the future? Maybe 4 is the new 5, but deeper thought would seem to suggest that this is a very-shortsighted view that will prevent the company from ever realizing all of the efficiencies and economies of scale that are available. This insight from one of the more forwarding thinking interviewees (who’s viewpoint was shared by about 10% of the respondents, who could be considered the leaders) sums it up best:

The review is continuous but the planning horizon is 7 years because the results couldn’t be reached in a shorter period.

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