Monthly Archives: February 2011

It’s Darwin Day!

Darwin Day is a global celebration of science and reason held on or around Feb. 12, the birthday anniversary of evolutionary biologist Charles Darwin, who is best known for the classic work On the Origin of Species in which he proposed natural selection, the basis of the modern evolutionary synthesis.

Darwin Day should not be confused with the Darwin Awards which salute the improvement of the human genome by honoring those who
accidentally remove themselves from it that are currently open for voting. (And while they do little to advance the state of science education, they are, in their own way, so sad that you have to laugh so you don’t cry.)

A Great Case Study on Spend Analytics in Healthcare

Health Leaders Media recently ran a great study on Spend Analytics that is a must read for any (health care) organization that doubts the savings opportunities that a good spend analysis tool can discover. In “elevating the spend analysis” function, the author clarifies that when it comes to effective capital management at your hospital, a spend analysis is the under-utilized tool that can transform your bottom line and bolster the strategic vision of the hospital.

The case study, about the Mount Sinai Medical Center in Miami Beach, FL, demonstrated how the project management office was able to employ spend analytics to quickly transform a an operating loss of 15.7 Million (in 2008) into a net surplus of 14.5 M (in 2009). What was a negative operating margin of 3.2% quickly became a positive operating margin of 2.95% for a total improvement of 6.15% in operating margin, which is very significant in a trouble economy. Plus, continued use led to even better results in 2010,when the hospital posted a 9.3% operating EBITDA margin.

For more details, see the case study on elevating the spend analysis function, but the message is clear. Spend analysis saves.

Sustainable Transportation, It’s Harder Than You Think

Material Management & Distribution recently published an article that asked if “your international shipments [could] be more sustainable”. It’s a good question since not all modes of transportation are equally damaging to the environment, but the issue, as the article attempts to point out, is not as simple as carrier selection. Consider the following factors put forth:

  • ocean vs air freight
    while air shipments can emit up to 35 times more carbon than ocean container shipments, let’s not forget that a single giant container ship can emit the same amount of cancer and asthma-causing chemicals as 50 million cars and that the ocean shipping industry is responsible for 6,000 times the emissions of every single automobile on the planet — many of the older container ships in operation are the dirtiest modes of transportation on the planet
  • container size
    bigger is better if the port and the trucks can handle it, but you have to service the lowest common denominator in the supply chain
  • fuels and fuel treatments
    biodiesel blends are better, provided the equipment is built for the blends and the blends deliver sufficient octane; otherwise, the savings are minimal if the switch doubles the amount of fuel that is required
  • speed
    slower-moving vessels will consume less fuel if they are moving in the range of optimum performance; too slow will just increase fuel requirements
  • “electric” ships
    a ship that plugs into a grid only reduces its carbon and GHG footprint if the grid’s primary energy source is cleaner than the ship; if it happens to be a brand-new ship that uses low-sulfer fuel, catalytic converters, and particle traps and the grid’s primary power source is a dirty coal plant, plugging in isn’t that much greener
  • trains vs trucks
    trains are better than trucks, but the carbon savings only kick in if you use less trains than you would need trucks; if the dock is a primary distribution point and load sizes are small, it might be better to send a truck or two to five geographically dispersed DCs then to load one train with five cars that have to split off to five different trains at the closest yard
  • gate and container yard operations
    trucker friendly is good, but the whole operation needs to be efficient
  • efficiency of inbound routes
    optimization is key
  • location of production
    choosing the right location (even overseas, if it’s close to a port) has a significant impact on overall carbon production

Sustainable transportation is important, especially with impending energy and carbon costs, but getting there won’t be as easy as selecting the right carrier. A detailed analysis of the end-to-end distribution chain will be required.

Why You Should Optimize Your Supply Chain

Besides the host of reasons this blog has provided you with in the past, which include:

if the supply chain isn’t optimized, it might not be nimble enough to keep up. As per this recent McKinsey article on building the supply chain of the future, ““the competitor that’s best at managing the supply chain is probably going be the most successful competitor over time“. Furthermore, as supply chains are becoming more splintered, they are getting harder and harder to manage by the seat of one’s pants, which increases the management complexity. In many organizations, instead of increased agility, this actually leads to increased inefficiency as managers struggle to manage the complex splintered chains efficiently.

But if supply chain optimization is employed, the splintered chains can be quickly optimized. But more importantly, an organization can progress beyond managing splintered chains to managing supply chain segments, which is likely the ultimate key to supply chain success in the years ahead. Think about it … if the origin and destination of goods has to continually adapt due to changing low cost locales and emerging (consumer) markets, then the ultimate key to quick adaptation will be to just change the relevant segments of the (splintered) chains and not the whole chains. If the organization was sourcing from Thailand but switches to Vietnam, but is still shipping to the US, why should the whole supply chain change? Maybe it’s still the same ocean carrier, and all that changes is the port and the carrier that gets the goods to the port. And if the organization has general contracts with a number of different international carriers, it will be quick to run an optimization and build the modified change from available segments.

And that, in a nutshell, is why you need supply chain optimization.

Lavante – The Newest Contestent in the SIM Arena

As mentioned in yesterday’s post, Lavante is the latest provider of Supplier Information Management solutions in the Supply Management space (which includes Aravo, AECSoft (just acquired by SciQuest), CVM Solutions, Hiperos, and Rollstream, which have all been covered on SI). And while it arrived late, it comes ready for battle.

Since you all know by now what a good SIM solution should do (and if you don’t, reread the classic vendor SIM posts linked above), I’m not going to waste any time describing what it should do or spend a lot of time on the details. Instead, I’m going to mention all the standard stuff that the platform does and then focus on what makes Lavante different from the competition and why it should be included in your SIM vendor short list.

Like its competitors, Lavante allows you to collect detailed information on all of your suppliers, including detailed information on each contact. By default, this detailed information includes tax information, headquarters information remit-to information, business structure information, ERP (System) information, ownership information, certifications, services/materials information, risk management information, insurance information, bank information, and user defined summary information. A supplier has the option of entering all of the information on-line or downloading a template. Lavante can import your current supplier master (in a standard format such as XML) or provide a buyer with a (CSV) template to enter information for new suppliers. The information collected can be customized for every supplier, notifications on change can be configured at the element level, and approvals can be required before critical information is changed.

In addition to the standard browser interface, suppliers can also respond to e-mails or faxes (and even call a rep who will enter the information for them if they are still technologically illiterate). The supplier interface allows a supplier to log-in and manage 100% of their information, which minimizes buyer effort if suppliers take an active role in buyer interaction.

At any time, a buyer can get a list of all suppliers who have not provided requested information as well as suppliers who have registered and completed their profile. The buyer can also see which communication attempts have been tried or whether or not the supplier has not provided an e-mail or fax number.

The distinguishing characteristics of the platform are the following:

  • it was built on the cloud
    it was designed to be 100% multi-tenant and cloud compliant from day one
  • extremely configurable
    many early platforms only had the ability to send an alert when a change was made; later ones allowed for alerts to be configured to change type; Lavante’s platform allows each individual data element to be marked as notify/don’t notify on change
  • automatic validation of Tax ID
    Lavante does a real-time check of every TIN that is entered and a supplier is not allowed to register without a valid TIN that matches their name
  • multi-mode outreach
    whereas most providers assume browser or e-mail data provision, Lavante also accepts faxes and integrates OCR and provides supplier outreach services that will get suppliers onboard by e-mail, fax, or phone if necessary
  • a supplier portal that equals the buyer portal
    suppliers were an afterthought in many first generation SIM platforms and a supplier had to log in to a separate instance of the portal for each buying organization they dealt with; in Lavante’s platform, a supplier can manage their data for all buyers who use Lavante through a single log-in — information needs to only be entered once and common information is segregated from buyer specific information
  • very large supplier database
    Lavante, which started as a recovery audit vendor, has been around for 10 years and has amassed a database of over 2 Million vendors that its client do business with — as a result, it has current information on over 2 Million vendors in its database

Plus, Lavante can use this platform to streamline its recovery audits and save an organization up to 10X more than a recovery audit without access to detailed information would save. So when you add the initial savings that will come from 1099 reporting compliance with reduced SIM (when 20% to 40% of supply base information needs to change annually) resource requirements and more successful cost recovery audits, the solution pays for itself almost immediately. Plus, since it’s true multi-tenant cloud, Lavante can turn your organization on in less than an hour.