Author Archives: thedoctor

A New Year is Upon Us – Do You Have Your SpendHQ Ready To Go? Part I

As SI outlines in its upcoming white paper on the Top Ten Transitions To Tackle in 2014 to Tame the Tolls, hyper-inflation is just around the corner, logistics capacity is on the rise (just like the cost of transportation), and working capital management is still lagging. If you put it all together, costs could rise out of control while millions of dollars sit tied up unnecessarily. The only way to avert this impending disaster is to take proactive action and get your spend, and spend management, under control.

In order to do this, you need good spend visibility — and, if you are not an expert in spend visibility or spend analysis, you need visibility that you can use and that is graphical, categorized, and relevant to your spend management needs. Furthermore, if you do not have technical skills (in house), you need services that can help you normalize, integrate, categorize, and cleanse your data. And if you don’t know where to start once you have the data categorized, normalized, and cubed for analysis, you need category expertise and consulting services.

If you are in one of these groups, up until recently there were essentially no solution options for you to choose from and even now, there aren’t that many. Furthermore, most of the solutions on the market that are available to you today, with only a handful of notable exceptions that you can count on your fingers (without your thumbs), fall into either the category of solution or service, but not both. However, for those of you that need an option that provides a full-service solution that includes data integration and category expert consulting, an often overlooked solution (that has been under continuous development for almost a decade) is about to make a big splash in the Spend Analysis and Visibility space.

That solution is SpendHQ. What started out as an internally developed tool to help Insight Sourcing Group (ISG) achieve the visibility they needed to help them drive savings for their clients, was transformed into a basic commercial software solution in 2007 for a select group of marquis clients to help those clients track spend and associated savings. Since then, ISG has spun off the product into an independent business unit which recently added new team members with commercial product development expertise from leading sourcing and spend analysis solution companies. This new business unit has been dedicated to improving and extending the tool for the last three years in quarterly product releases.

The solution has grown from a simple spend reporting tool into a fully featured spend visibility tool that tracks all of your spend over time — by category, department, and user; a category management tool that lets you dive into category spend and filter down to the items of interest, see managed vs unmanaged spend, and track compliance; and, as of the next release later this quarter, track contract meta data and do basic contract lifecycle management. In addition, the services component has matured and the organization can quickly import, merge, classify, and cleanse all of the relevant data from whatever ERP, AP, or Procurement systems you happen to be using and refresh this data for you as often as every week, although SpendHQ recommends monthly refreshes (even though, for larger clients, quarterly refreshes often suffice). (Their largest client, with 50 Billion in revenue, chooses to only refresh their data quarterly as real-time isn’t all that relevant where spend analysis is concerned.) Plus, SpendHQ can also integrate supplier data feeds for verification and enrichment and currently integrates with a number of office supplies vendors out-of-the-box.

While not the most powerful (ad-hoc) spend analysis solution on the market, it’s a really great solution for a mid-market company without a (useable) spend analysis or visibility solution that needs to get one up and running quickly, accurately, and usefully (as the solution has more power and capabilities than the average company needs to get great results). Within 4-6 weeks, a company with no spend analysis capability can be up and running 100% and be making useful, informed decisions. In the next two parts, we will dive into the visibility and analysis capabilities of SpendHQ as well as the category management capabilities.

It Shouldn’t Be Hard to Justify Investments in Risk Avoidance

But if it still is, despite the enormous losses that many firms have sustained in recent years as a result of mega-disasters, a recent article over on Supply Chain @ MIT on “Justifying Investments in Risk Avoidance” by Yossi Sheffi (author of The Resilient Enterprise: Overcoming Vulnerability for Competitive Advantage) provides you a good starting point.

The article outlines three possible approaches for presenting a convincing case for investments in supply chain resilience.

Approach 1: ID Situations Where Resilience is a By-Product

Some actions taken by business will increase resilience even though the objective is entirely different. Examples include investments to insure superior service, postpone production (to adapt to market shifts), and adapt to different (raw) materials and components if the current primary (raw) material or component becomes unavailable. If another business justification can be made for the investment that will be looked upon more favourably by the C-Suite, focus on that justification (and that justification alone).

Approach 2: Highlight Other Benefits

If the investment is, or will be, primarily to support resilience and no business case can be made without mentioning resilience, be sure to highlight any and all additional benefits the business can expect to receive. For example, if the investment in resilience will improve operational efficiency, provide additional capability, or even improve the image of the organization it will be worth it. The example Sheffi provides is that of Walmart’s Emergency Operations Center (EOC) that manages flow of supplies in crisis situations. Many days before Hurricane Katrina hit the Gulf Coast in 2005, Wal-Mart had prepared 45 trucks full of critical supplies at its distribution center in Brookhaven, Mississippi. By deploying these trucks Wall-Mart reopened 66% of its stores in the affected area within 48 hours, and within one week 93% of stores were reopened. This boosted Walmart’s image in a way nor advertising campaign ever could!

In addition, a resilience effort that maps the supply chain, at least for critical goods and services, down to the raw material suppliers not only supports quicker responses to crises, but can also be used to support social responsibility and sustainability audits. Not a money-maker by any stretch of the imagination, but it can do wonders for the brand if you can show that your supply chain is, for example, free of conflict diamonds when your competition’s supply chain is not.

Approach 3: Hitch Resilience to Other Goals

In this approach, when you cannot find another justification or highlight the benefits enough to get approval, you take on the role of a PR spin doctor and show how the effort can contribute to another, sometimes entirely unrelated, goal. The example given by Sheffi in this case is if you need most, or all, of your staff to be able to telecommute in the event of a crisis, present the project to support this as a diversity and inclusion initiative that would allow mothers to stay with their babies and empower disabled employees to stay active. It’s not an optimal approach by any means, but if the shoe fits …

It’s good advice from a great article. And for those of you in logistics, Sheffi recently published Logistics Clusters: Delivering Value and Driving Growth that you might want to check out. (Clusters can also be a form of resilience.)

Top 12 Challenges Facing India in the Decades Ahead – 12 – Infrastructure

When it comes to infrastructure in India, as Business-in-Asia.com notes, it really is A Long Road Ahead. China really is decades ahead of India in terms of its transportation and communication infrastructure. In India, airports, rail networks, roads and ports are all in desperate need of repair, expansion, replacement, and, in some regions, creation! As Manish Agarwal stated in A Passage to Modern India (PDF) in the Summer, 2013 issue of Gridlines, decades of underinvestment have left the country with dire deficits in such critical areas as railways, roads, ports, airports, telecommunications and electricity generation. In the World Economic Forum’s Global Competitiveness Report for 2011-2012, India ranked 89th out of 142 countries for its infrastructure. In this light, it’s remarkable that India is ranked 9th in (nominal) GDP by UN, IMF, and World Bank!

Roads are terrible. In a country where 65% of all freight is transported by road, this is a supply management nightmare. In fact, the traffic situation is so severe that the maximum highway speed for trucks and buses is only 30-40 km per hour! (As per a report of the Sub-Group on Policy Issues of the Government of India’s Ministry Road Transport and Highways, found on the Ministry’s Web Site.) And with the urban population expected to increase by 33% in the next five years, the situation is only going to get worse before it gets better.

Even if India succeeds in spending the 1 Trillion allocation it has committed to between now and 2017 — targeted at three airports, two ports, an elevated rail corridor in Mumbai, and almost 9,600 kms of road, the congestion eliminated will only be a drop in the bucket in a country with 87 airports that offer commercial service (Source: Wikipedia), 13 major and 187 notified minor and intermediate ports (Source: Wikipedia) of which 139 are operable (Source: India Core), 64,460 kms of rail (which is the fourth largest rail network in the world, source: Wikipedia), and 4,236,000 kms of road in 2011 (Source: Wikipedia). Thus, even if India managed to achieve its plan of building 20 kms of road a day, or 7,300 kms a year, that would only increase the total capacity by at most 0.17% annually, and do almost nothing to address the severe over-congestion plaguing the urban areas and major trade routes. Especially when India is adding about four million four-plus tire vehicles every year and about eleven million two-wheelers.

The airport situation is just as bad. Even though the country has 87 airpots with commercial service, the India Planning Commission estimates that the country will need an additional 180 airports in the next decade — so improving 3 is not going to do much! (See the 12th 5-Year Plan from 2012-2017, page 21.)

The port situation isn’t any better. As per IndiaCore, the current capacity at major ports is overstretched. The major ports together have a capacity of 215 million metric tonnes (MMT) at 1997- 98 levels (and 288 metric tons at 2001-2002 levels). However, the traffic for total ports in India was worth 740.3 MMT in 2009 and 818.7 MMT in 2010 and this is expected to rise to 1,373.1 MT in 2015 at a compound annual growth rate of 7.6% a year. In other words, throughput increased by a factor of 4 during the zeroes and is expected to increase another 50% by the end of 2015. However, investment in Indian ports in the zeroes was a mere 2.5 Billion. (Source: “Global Investments in Ports and Terminals” on HFW.com) To put this in perspective, the US West Coast ports are investing 12 Billion (Source: Pacific Merchant Shipping Association) just to handle a few more hundred MMT.

When you consider the inadequacy of the road, rail, air, and ocean transport networks, one has to wonder how India is going to cope with the expected annual rate of increase of 12% for domestic cargo and 10% for international cargo over the next five years, at the same time passenger traffic is expected to increase 12% annually domestically and 8% annually internationally. It’s a huge challenge, and one that’s not going to be solved anytime soon.

Apparently Accountants Have a Very Different Meaning for the Word Enormous

According to a recent article in Modern Material Handling (MMH), which reported on the Grant Thornton Realities of Reshoring Survey and quoted Wally Gruenes, Grant Thornton’s National Managing Partner for Industry and Client Experience, the results (of the survey) could dramatically impact U.S. trade balances, and should provide an enormous boost to domestic manufacturers, retailers, wholesaler/distributors and service providers. Great news, right?

Let’s dig in. According to the results of the survey, more than one-third of U.S. businesses are likely to move goods and services back to the United States in the next 12 months. In particular, 42% of executives indicated they were likely to bring back IT services, 37% said they were likely to bring back components/products, 35% said they were likely to bring back customer services or call centres, and 34% said they were likely to bring back (raw) material. Not exactly enormous, but not too shabby either. For one third of companies to at least be thinking in the right direction, that’s pretty good. Except when you dig in and realize that the numbers imply that as much as 5% of overall U.S. procurement may come back to the United States. 5% is not enormous! It’s not even close. And this is the best case scenario, which we know isn’t going to happen.

First of all, someone would have to get off of their @ss and push for a major change (and in your average company, meet a lot of resistance). This is something that only happens in market leaders, which we know are only (depending on which analyst firm you ask) the top 8% to the top 20% of the market. Secondly, a C-Suite executive, still focussed on quarterly numbers and penny pinching, would have to sign off on what could be moderately high one-time expenses associated with re-shoring — expenses which would be minimal in the mid-to-long term, but which would probably really irk the CFO in the short term (and mess up his attempt to look good for Wall Street). (And given the number of companies that have invested in training over the last 5 years, even though case studies from Procurement training institutes, including Next Level Purchasing, have proven ROIs of 10X to 100X from proper training investments, we know that few companies in North America put long term savings ahead of short term gains.) Thirdly, someone has to be willing to get a little egg on their face and admit that maybe outsourcing (so much) to China wasn’t that great of an idea in the first place — that if appropriate investments had been made at, or near, home to increase productivity, decrease production time (and cost), and improve operational sustainability, similar cost savings could have been made over the long term with an appropriate investment up front. How many pompous C-Suite executives in North America are willing to fess up and admit they were wrong? (Let’s put it this way, the Mad Men would be an awful lot poorer if more were.)

Long story short, if even 1% comes back this year, the doctor will join you in the dance of joy because he just doesn’t see it happening. He’d like nothing more than for 10% to come back, especially since he’s been preaching the importance of Home Cost Country Sourcing since 2007, but believes only the true market leaders will take any actions at all. Most companies just aren’t hurting enough to bother.

Network Programming Turns 65 Today!

Considering the extent of network programming that we take for granted today, with coast to coast networks and global broadcasts, it’s hard to believe that the first network broadcast took place a mere 65 years ago today when KDKA-TV went on air on January 11, 1949 (as WDTV). The 51st television station in the U.S. in Pittsburgh, Pennsylvania, it began with a live one-hour local broadcast from Syria, Mosque that was broadcast over the first “network” that included Pittsburgh and 13 other cities from Boston to St. Louis. It was a small network, but it was the beginning of the national, international, and global broadcasts we now have today.