Without the transparent due diligence that accompanies the best practices these systems enable, this is what the organization ends up buying:
Monthly Archives: August 2010
Why we need e-Sourcing and e-Procurement
Without the transparency these systems, this is how vendor discovery really happens:
What Happens When You Use Walmart Consultants
Today on Dilbert, Scott Adams uses Dogbert to effectively illustrate what happens when you use a Walmart consultant.
What you have to remember with consultants is that you get what you pay for. If you pay a cut rate, you get a job with corners cut, as illustrated today in Overboard …
… and you get the pleasure of the consultant blaming you for their incompetence!
When hiring a consultant, it’s important to remember that it’s all about the value they can deliver, directly or indirectly. For example, a consultant with the skills and to help you devise a new business strategy that ends up increasing your sales by 30% is worth his weight in platinum. You should gladly fork over a few thousand a day for that kind of expertise as it will end up netting your company millions in the long run. A consultant who can help you select the right optimization or data analysis system for your business that can help it save an average of 10% on corporate buys is worth her weight in tantalum. And a technical resource who can adhere to a schedule and get the job done right the first time is worth his weight in gold — and it still amazes me that in 2010 the vast majority of companies haven’t figured this out! Everyday I hear another example of a company that went with the lowest bid and either got a system that didn’t work (and had to be scrapped) or, after exceeding the schedule and budget by 50% to 150% got a system that only did most of what it was supposed to do and required timely, and costly, manual workarounds. So, instead of paying 30% more for skilled resources who could do the job right the first time within the quoted timeframe and budget, the company spent 50% to 150% more for unskilled resources who delivered a shoddy product with a higher operational cost.
So stop hiring Walmart consultants, especially when, all things considered, Expert Advice is Cheap!
A Hitchhiker’s Guide to e-Procurement: Tax Reclamation, Part II
Mostly Harmless, Part XVI
In the last post, the process of tax reclamation was defined and some of the complexity around tax reclamation was discussed. This post will address some of the challenges associated with tax reclamation, some best practices, and the benefits that could be expected from an appropriate e-Procurement solution with good tax reclamation support.
Common Challenges
- Tax Rate Verification
Is the rate being charged by the supplier the right one? This is tricker than it seems. In HTS, almost identical classifications can have greatly differing rates (which has led to lawsuits by retailers on the basis of gender discrimination, since they believe that gloves for a man should be taxed at the same rate as gloves for a woman). Some countries update tax rates on an irregular basis. (HST [Harmonized Sales Tax, a blending of the GST and PST in some provinces] increased in three provinces in Canada on July 1.) And sometimes a supplier is using an old database or makes a human error.
- Reclaimable Tax Identification
Can the organization recover the tax? Is it out-of-state? GST or equivalent? A VAT to which it is exempt?
- Tax Credit Identification
Is the expenses an eligible Research & Development expense that can be credited against taxes payable (such as the SRED in Canada)?
Best Practices
- Automatic Tax Rate Verification
It’s amazing how many AP clerks will accept the tax calculation as valid, without even a cursory glance, once they have verified the items have been delivered and the rate appears to be in an acceptable range.
- Automatic Exemption Flagging
To simplify recovery efforts, any taxes that the organization knows it is eligible to recover should be automatically flagged by the (rules-based) system. In addition, the system should also flag any tax payments that the organization might be able to recover and that should be manually reviewed.
- Automatic Flagging of Suspect Taxes for Manual Review
Any taxes that are not in the system should be flagged. Any calculations that are not consistent with internal calculations should be flagged. And the invoice / taxes SHOULD NOT be paid until manually reviewed.
Potential Benefits
- Prevention of Overpayments
Automatic verification of taxes (to insure they are valid) and rates (to insure they are current) can prevent significant overpayments.
- (Over)Payment Recovery
A good tax tracking system can simplify overpayment recovery when such payments are made (which will sometimes be unavoidable, especially if a 3PL or broker handles imports and screws up a filing), and can simplify recovery of taxes the organization is eligible to recover on a quarterly or annual basis.
- Future Credits and Savings
The ability to flag payments that might be (partially) eligible for tax credits can greatly simplify the process of claiming tax credits in an acceptable manner. This can reduce corporate taxes and lead to considerable organizational savings over the long term.
Once the taxes are reclaimed, the actionable part of the procurement cycle is complete and it’s time to analyze performance, which is the subject of the next post.
Next Post: Analysis, Part I
Everything I Needed to Know About Procurement I Learned at Clown College
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When people ask me why I’m so good at Procurement, despite not having a formal degree in business or supply chain or a professional certification such as the CPSM or SPSM, I tell them that I learned everything I needed to know at Clown College. At this point they let out a hearty laugh and walk away, but I swear on the clown’s code of ethics that it’s the honest truth.
People think it’s easy being a clown, but it’s not. It’s very challenging, just like Procurement. And the skills required are quite similar. And while I enjoy the sound of laughter, I would like to dispel the misconception once and for all that all you do at Clown College is clown around. So, in this post, I’m going to tell you the ten most important things I learned in Clown College and how they helped me to excel at Procurement.
- Paint Your Face
As a clown, you need to maintain a consistent mood every second of every minute of every hour of every day. This can be very hard to do. But if you paint on a happy face, you can be happy all the time. And if you paint on a scowl, you can be scowling all the time. You’d be amazed how much this can help in tense negotiations.
- Put On Your Big Red Nose
Just like a clown wears his heritage with pride, a Procurement professional needs to take pride in his, or her, work and let it show.
- … and Your Brightly Colored Costume
One of the biggest keys to success, especially in Procurement which was traditionally relegated to the back room or the basement, is to get noticed. Just like his brightly colored costume helps a clown stand out from the crowd, dressing sharply helps a Procurement professional stand out.
- … and Your Big Red Shoes
You never know when someone is going to try and step on your toes! The extra padding goes a long way to protecting your feet.
- … but Stay Light on Your Feet
as you never know when you’re going to have to dance around an issue or run away from a charging bull. (After all, no matter how good you are, you can’t win every fight!)
- Storytelling is an Art Form
A clown has to engage his audience with a good story, just like a Procurement professional. The ability to tell a good story becomes important when you have to balance the conflicting needs of multiple stakeholders in a major buy but still claim all-around success. It’s especially important when you have to explain to the CFO why you had to pay more to get the reliability required by engineering and the usability desired by the end customer (which is key if Sales is to meet its quota).
- Keep Your Hands Sleight
because sometimes you just have to make magic happen!
- Learn How to Take a Hit
When clowns get together, someone always gets smacked upside the head. Always. The same happens in business whenever something goes wrong, and they almost always try to blame Procurement first. The ultimate key to success is to be able to pick yourself up, dust yourself off, and keep going like nothing ever happened.
- Maintain a Good Sense of Humor Through it All
In life there are ups and downs, but you’ll be able to get through them all if you just maintain a little humor in your heart.
- And Learn How to Work as a Team
as you never know when you’ll have to squeeze into the equivalent of a Volkswagen Beetle with ten of your best buddies in an all-weekend disaster recovery session at an off-site location after a natural disaster took out your primary location.