Author Archives: thedoctor

The Big X are Pushing Operate Services … But Can They Really Offer Them? And Are They Real?

And if they are real, can anyone?

Backing up, in the beginning, there was traditional Business Process Outsourcing (BPO), which became very common in the 1980s and 1990s as the result of constant claims by the big consultancies and their ilk that the only way businesses could enhance their flexibility and agility and maximize their competitive advantage was to outsource processes they weren’t good at to the Big X Outsourcing offices. (In some cases they weren’t wrong. When the business had no competence in a function, grossly overpaying someone with reasonable competence, even if that someone was not the expert the Big X claimed, generated a good return for the business. The function was done efficiently and effectively, negating the loss the business used to suffer, and it allowed the business to focus on the functions they did well, which increased their profit even as they (often unnecessarily) forked out seven (7) and eight (8) figures to the Big X every year. (And we say unnecessarily because most of the time they could have outsourced to a smaller, niche consultancy at one third to one half of the cost and achieved the same result.)

Then, as Big X tried to steal business from their competitors and niche firms tried to break in, they upgraded to “Managed Services” which was supposed to be more than just performing the service for you cost efficiently (by supposedly reducing your costs by doing it better, and thus, cheaper) and adding value. The idea was that it didn’t just take over a point-based function, but instead provided a dedicated team that basically took over an entire department for you, just offsite, and worked exclusively on your projects. They learned your business, and improved the service offering over time to not only maximize efficiency, but maximize value. If they took over your IT department, they learned the systems you used, optimized those, learned to provide quick and effective problem resolution on the help desk, and, when you needed a new solution, helped you identify the one that would work best with the systems you had. If they took over your AP, they learned your suppliers, your payment rules, your PO formats, and implemented systems that allowed them to match POs to invoices for high-value invoices to reduce overspend. They also helped you build catalogs from suppliers that could meet your MRO / internal needs at the lowest possible cost. And so on. Over time, they not only met SLAs, but improved on all key metrics.

But now a few of the Big X are saying that Managed Services is not enough to maximize value and you need premium “Operate Services” (which come at a premium price, of course). So what’s the difference? Hard to tell. The best definition we can find is it’s a “holistic approach that is focused on delivering outcomes and spurring innovation in a model that leverages automation and data insight to generate substantial business value”. the doctor thought that was what managed services was supposed to do for you? Other definitions indicate that “operate services” differentiate by providing “on demand access to expert talent”. Isn’t that why you use a managed service, so they can identify when the team needs a new expert and add that expert? Other definitions also indicate that “operate services” are more “collaborative”. Are they saying that the managed services they provided to you in the past, where they often acted as an entire department, weren’t collaborative? WTF?

In other words, while they are presenting it as a more advanced premium service model, for which they want to charge you a premium, it really isn’t, or shouldn’t be, because if it is, they are admitting they have been ripping you off for decades!

In some consultancies, it is just a specialization of managed services for IT/IT Security, Analytics-Heavy Functions like Strategic Procurement or Network Analysis, or highly technical functions like supplier identification in direct manufacturing. And it costs more because those people, who are much rarer than experts in traditional business functions and processes, are more expensive, as are the tools that they need to secure your enterprise, analyze your global spend, analyze your supply network, or analyze potential suppliers for your electronic components. And we can see how that could be fair, as long as they aren’t using “operate services” to increase costs across the board where there is absolutely no justification for it.  (And only using it to differing a subclass of specialized services they offer, and admitting its nothing more than managed services, just applied to a new set of business functions.)

But if the consultancy is trying to pitch these “Operate Services” across the board with claims that these new services are better and more specialized for your business than any other kind of service, then they are admitting they are currently ripping you off in your managed services and you should just fire them. Because there should be no difference with the exception that the subclass of operate services we defined in the last paragraph generally require more advanced systems and more resources with a high TQ, which usually cost more. But that’s it.

So don’t blindly fall for this brand new business pitch if they try to pull it on you — simply compare what they are offering to any other firm that says they can fully meet your needs with a traditional managed services model and give the business to the firm that is the most honest among those that can meet your needs.  Now, it might be new and more in depth and more valuable, but that’s not guaranteed.

PostScript: We do believe Big X can offer a lot of value.  See this post on When You Should Use a Big X!

Source-to-Pay+ Part 5: Supply Chain Risk (Generic)

In Part 1 we noted that Risk Management went much beyond Supplier Risk, and the primitive Supplier “Risk” (or should we say “Uncertainty”) Management application that is bundled in many S2P suites. Then, in Part 2, we noted that there are risks in every supply chain entity; with the people and materials used; and with the locales they operate in. In Part 3 we moved onto an overview of Corporate Risk and then in Part 4 we took on Third Party Risk (in Part 4A and 4B).

But there’s much more to risk than just the (internally focused) corporate risks and the third party (supplier) risks. There are also supply chain risks. Today we are going to discuss the basic supply chain risks that an organization can expect to keep track of with a generic supply chain risk management application.

Capability Description
Multi-tier Mapping A good supply chain risk management system will map the organization’s known supply chain and allow them to track what facilities are located where, at least to the extent that they supply a higher tier that eventually leads to a good or service being delivered to a company location. This will include the tier 1 suppliers, the tier 2 suppliers they use, the known locations of the suppliers they use, all the way down to the raw materials. It will include intermediate warehouses, ports, (cross)-docks, rail yards, and FTZs used by the organization.

The organization will be able to search by product, and see the known supply chain. Search by location, see the suppliers who are there, and then see all the products that flow through those suppliers at that location.
Geo-Political Tracking For ever region the organization does business in, the platform tracks news and events related to the geo-political climate. Government decisions, labour unrest, increases in crime, terrorist activity, man-made disasters and other, related, events will be tracked. Government stances on issues, local business preferences, likely election outcomes, and anything that could cause a change in the political climate will also be tracked.

For each government decision, labour unrest, terrorist activity, man-made disaster, closure, etc, the platform will associate it with all affected suppliers and supply chain network nodes (warehouses, ports, etc.) in the network. In addition, any news or events that may turn into an event of interest will also be referenced.
Economic Tracking For every region the organization does business in, the platform will track the local economics. How is the currency trading against the primary currencies used by the organization and is it increasing or decreasing in value. How is the local job market, is unemployment decreasing or increasing? How is local consumer spending?

All of the above are indicators of the local economy. The organization is interested in not only how much it will cost for the goods now and tomorrow, but, if they are selling in the local economy, how likely it is the local market will (continue to) be able to afford the products, and how likely the supplier will be able to attract and retain the workforce it needs to serve the organization.
Natural Disasters For every region, and every region between every region the company sources from and every region they sell in, the organization tracks natural disasters, their impacts, and, if recovery is necessary, the state of recovery. It also tracks natural disaster risk, and any nearby (weather) events that could turn into a disaster (hurricanes forming over the ocean, tremors that could signal an earthquake, lava flows that could signal a volcanic eruption, etc.).

In addition to tracking the disasters that have happened, might happen, and will happen again, it also tracks the impact a disaster will have for every day a supplier’s operation is disrupted. The platform will contain the ability to model the cost of a disruption at every tier 1 node and propagate that down the chain.
Disruption Tracking The platform will also contain the ability to track arbitrary disruptions, track the recovery status, model the potential impact, and track the actual impact.

This will normally form the foundation of a control centre, which will be integrated with the analytics and monitoring capability (which, as we noted in our last three parts, will be covered in a separate article), and allow the organization to centrally track, manage, and mitigate organizational risks.
Transport Mapping & Tracking As noted above, the platform will track every region, and every region between every region, that the company operates in and use this information to map and track the organization’s transport networks. Every node used by every carrier will be tracked, every lane will be mapped, and every route monitored to the extent possible by the application.

This normally won’t be a full fledged transport risk management platform, which will be something we cover in another article, but will provide enough foundations that a third party application can be linked in or data feeds imported.

Moreover, a Generic Supply Chain Risk Management Application will also contain a host of generic analytics/planning/monitoring capabilities, but since many of these are common, and since stand alone risk-focussed analytics applications are also part of the plethora of offerings out there, instead of discussing these generic features in this and every other article, as we noted in our coverage of Corporate Risk, we will instead discuss these capabilities in an article dedicated to Risk Analytics and Monitoring.

Source-to-Pay+ Part 4B: Third Party Risk, Part 2

In Part 1 of this series we noted that Risk Management went much beyond Supplier Risk, and the primitive Supplier “Risk” Management application that is bundled in many S2P suites (which is really more of a Supplier “Uncertainty” Management module). Then, in Part 2 of this series, we noted that there are risks in every supply chain entity; with the people and materials used; and with the locales they operate in. Then in Part 3 of this series we discussed inwardly focussed Corporate Risk Management, which some companies offer partial solutions to in the form of GRC (Governance, Risk, and Compliance) solutions.

Then, yesterday in Part 4A, we began our discussion of third party risks and outlined some of the specific baseline capabilities that such a solution should possess. Today we complete our discussion of third party risk and outline the remainder of baseline capabilities that we believe such a solution should possess.

Sustainability An organization needs to be sustainable, which it can only be if the suppliers it uses are sustainable as well. As such, a TPRM solution needs to monitor the sustainability of its suppliers. Their carbon footprint, or at least the footprint of the products/services they provide, associated GHG emissions, and (fresh)water utilization, especially if significant or beyond the norm (and reducable).

This part of the application should integrate with third party data feeds and assessments on sustainability as well as the integrated assessment module.
Commodity Markets Sudden, unexpected, price increases represent a great risk to the organization, no matter where they occur in the chain. Since it’s usually the supplier (or the supplier’s supplier) who buys the raw materials from the commodity markets, the organization often doesn’t know about the price increase until it’s too late. Thus, it’s critical that an organization monitor the commodity markets for any raw materials it needs in considerable quantity that can have a significant impact on its financials.

Thus, a good TPRM system will integrate with commodity market feeds and track the raw materials used in the relevant Bill of Materials of the organization. As such, the system should also integrate with the ERP and be able to pull in the raw materials the organization’s suppliers need to acquire in large quantities on a regular basis.
Location Considerations There’s a lot of risk associated with a location. Geopolitical, economic, natural disaster, and so on. The system should track all of the locations associated with each third party, the risks associated with the location, the likelihood, and, if possible, the potential impact.

This part of the solution should tie into the event monitoring, sentiment monitoring, third party feeds, and any other indicators that could indicate a location-based risk. When one is detected, all of the (potentially) impacted suppliers should be identified, and the potential severity of the event also identified.
Certificates The solution must track all appropriate certificates / certifications for third parties that the organization needs to verify that the organizations are compliant with regulations, have the appropriate insurance, and so on.

A good solution will also integrate with third parties that can verify the existence/issuance of the certificate, the dates of validity, and other key meta-data.
Industrial Accidents It’s important to keep track of any industrial accidents in the third parties you do business with, whether they have been cleaned up, what the impacts were, and whether or not the third parties have taken steps to prevent similar accidents from happening again. A supplier that could be shut down at any time due to an accident which has more than a negligible chance of occurring is not a reliable supplier. Plus, this can also impact reputation / brand.

Thus, the application needs to tap into organizational filings and disclosures to identify past accidents, event monitoring to identify accidents as they happen, assessments to get updates from suppliers as they clean up / recover, action plans that capture what the supplier/third party plans to do, and monitoring.
Recalls Just like its important to keep track of industrial accidents, it’s also important to keep track of recalls. For what, how often, and how severe. A supplier that has to regularly do recalls has quality (management) issues and is not a supplier you want to be relying on.

It’s important that the application track recalls, track any updates on those recalls, and track any news stories that led to those recalls. You also want to know how often a supplier has had to do a recall in the past.
Related Parties We’ve more-or-less stated this in many of the sections above, but it’s critical that you track the parties related with a supplier/third-party of interest. Those that supply, service, or invest in the third parties you rely on should also be tracked. In addition to tracking these, it’s critical to maintain the relevant relationships between the parties and keep this up to date.

The system should integrate with third party corporate registries that track ownership and relationship information and update the relationships in the TPRM as necessary.
Action Plans / Development Goals As we hinted at in our discussion of Industrial Accidents, it’s not enough to just track the risks, the likelihood, and indicators they are materializing / have materialized, an organization has to work with suppliers to minimize the likelihood and, should they materialize, minimize the recovery time and the impact on the organization.

The application must support the definition of a multi-stage plan, with multiple tasks per stage, collaborative development of the plan, approval workflows, and when the plan is instantiated, execution and tracking of the progress made by the third party. Basically, it’s customizable development program management for a third party.
Maturity Model The platform should support the definition of maturity models by third party (supplier) organization type, the mapping of third parties to these models, default action plans that can be instantiated to help a third party progress up the maturity model, and associated metrics to measure the aptitude of a third party at each level.

In other words, it’s not just point-based program management for the development of select capabilities in a third party, it’s integrated multi-faceted organizational management of a third party with monitoring, management, and reporting over time.

Moreover, a Third Party Risk Management (TPRM) will also contain a host of generic analytics/planning/monitoring capabilities, but since many of these are common, and since stand alone risk-focussed analytics applications are also part of the plethora of offerings out there, instead of discussing these generic features in this and every other article, as we noted in our coverage of Corporate Risk, we will instead discuss these capabilities in an article dedicated to Risk Analytics and Monitoring.

Source-to-Pay+ Part 4A: Third Party Risk, Part 1

In Part 1 we noted that Risk Management went much beyond Supplier Risk, and the primitive Supplier “Risk” Management application (that we prefer to call Supplier “Uncertainty” Management) that is bundled in many S2P suites. Then, in Part 2, we noted that there are risks in every supply chain entity; with the people and materials used; and with the locales they operate in. Then, in Part 3, we discussed inwardly focussed Corporate Risk Management, which some companies offer partial solutions to in the form of GRC (Governance, Risk, and Compliance) solutions.

Today we are going to talk about some of the third party risks and outline the function specific baseline capabilities that such a solution should possess. Before we get started on the risks, we should note that a third party risk management (TPRM) can also be used for Supplier Management as a supplier, in addition to being a second party, could also be one of the many “third parties” an organization has to worry about if it is a sub-tier provider contracted by another primary, first-tier, supplier of the organization and a good TPRM solution will contain all of the functionality in an average Supplier Risk/Uncertainty Management module in a Source-to-Pay solution and much, much more.

We’ll continue in yesterday’s format, outlining some of the key capabilities and what that may mean solution-wise. There are quite a few key capabilities. So many, in fact, that, as you may we’re actually breaking this article up into 2 parts.

Capability Description
Customizable Assessments No matter how many capabilities come out of the box, every organization is going to need to do a customized assessment of a third party at some point. Thus, any TPRM system must support the creation of customized assessments with arbitrary questions, multiple forms of answers (multi-select, numeric, free-form, etc.), customizable weighting systems (that also support group-based weightings using averages, medium, or weightings based on role) and customizable reporting on the results.

In addition, the system should come with a slew of starting, customizable assessments out-of-the-box on every area covered in the application, whether or not there are third party data feeds and assessments that can be sucked into the application for use by the client. (This is because most third party feeds and assessments come with a cost, which may not be worth it to the organization if that aspect is only relevant to a few suppliers or doesn’t cover all of the aspects an organization needs.)
Reputation/Brand As we noted in our last article, a significant risk to the company is its reputation/brand, and that includes reputation/brand risks that come from being associated with third parties with reputation/brand risks. As a result, an organization needs to keep on top of the reputation/brand of its suppliers and partners.

Thus, it needs a platform that can monitor news sources and social media and look for stories about all of its suppliers and partners that could blow up, sentiment that could propagate, and events that could cause repercussions through the supply chain.
Regulatory Compliance Organizations need to be compliant with regulations in every geography in which the organization does business, which means that it needs its core suppliers and key partners to also be compliant with those regulations. As a result, it needs to monitor all of its suppliers and their suppliers/partners for compliance with the regulations that are relevant to those suppliers/partners.

This may mean tracking certifications, tracking raw material inputs, tracking human resources assigned to projects, tracking carbon/GHG reports from the third party, and other key pieces of information. It may mean asking suppliers for additional (self) assessments, getting (temporary) access to third party data feeds, and having third party do compliance audits for you.
Ownership/Financials Just like your company cannot be associated with sanctioned entities, you need to be careful not to do business with suppliers who are (partially) owned or controlled by sanctioned entities as well or who are doing business with sanctioned entities to support your organization. In addition, you don’t want to be doing business with suppliers or third parties who are financially unstable, as their bankruptcy could negatively impact your business.

Thus, this system must tie into all sanctioned and denied party lists of every country it operates in, cross-reference the ownership and partners of all suppliers/third parties the company does business with against the sanction list, and monitor ownership changes as they occur. In addition, it should tie into systems that monitor financials of public companies as well as systems that judge the financial stability of private companies.
Human/Labour Rights Legislation has been introduced and/or is being considered in many jurisdictions around the world that make your organization responsible for any abuses of human or labour rights in the supply chain. It’s important to have systems that can monitor for human/labour rights in the supply chain, even if this is only through integrations with third parties that do (independent) on-site assessments.

This should also make use of the brand/reputation monitoring module that monitors news sources, events, and related data feeds to scan for anything that could indicate a human/labour rights violation.

Come back tomorrow for Part 4B as we continue our discussion of Third Party Risk.

The first jobs lost to OpenAI were at OpenAI? I LOVE IT!

In honour of the first five jobs that were lost to OpenAI, at Open AI (where it was announced the CEO, president, and 3 senior staff were stepping down and/or let go this week).

To the tune of I Love It by Icona Pop (feat. Charli XCX)!

I got this feeling on the winter day when you were gone
You crashed your car into the bridge
I watched, you let it burn
You threw our shit into a bag and pushed it down the stairs
You crashed your car into the bridge

I don’t care, I love it
I don’t care

I got this feeling on the winter day when you were gone
You crashed your car into the bridge
I watched, you let it burn
You threw our shit into a bag and pushed it down the stairs
You crashed your car into the bridge

I don’t care, I love it
I don’t care

I’m on an Earthern road, you’re in the Milky Way
You want me down on earth, but you’re up in space
You’re so damn hard to find, that AI took over
You said it’d take our jobs, but it f*ck3d you over!

I love it
I love it