Category Archives: Blogologue

the doctor Wants To Assure You That This Blog Is Not Evil

The unnaturally observant will notice that this is the 666th post. Knowing that the majority of readers of this blog are from North America or the UK, that the predominant religion in these parts of the world is Christian, and that many Christians associate 666 with the number of the beast, I feel that it is important to point out, for their piece of mind, that this blog is not evil. Furthermore, this post does not have any special significance.

I should also note that I do make it a point to expose the truth wherever I can find it – be it the elephants in the room that your vendor would rather keep hidden behind the blind; the myths that salespeople use to spread fear, uncertainty, and doubt; or the reality with respect to what a technology-based product can, or can not, do. While it’s true that I will praise certain vendors on their innovative technology or service offerings, it’s also true that I will harshly criticize others for promising more than what they are really delivering. Moreover, if all they’re doing is serving up last year’s outdated technology in a new shiny wrapper, I can be quite harsh in my scathing expose. And if they’re all haughty about it, or their messaging is way over the top, then it’s the case that I’m likely to open the water tower door and let out the Sourcing Maniacs.

Okay, maybe this blog is just a little bit evil.

Blogologues on Hiatus

I know that you’re still without your evening monologues, and as defacto members of the larger Colbert Nation, I know that you’re finding it tough, but it is that time of year where even pundits take a break for the holiday season. Furthermore, with the 12 Days of X-emplification starting tomorrow, you’ll still be receiving your daily dose of the doctor‘s wisdom, and you should be able to manage just fine.

After all, it is time that you started kicking in a bit of overtime at the office and at home to get ready for the holidays. This hiatus will insure that even if you have to reduce the amount of time you spend on your daily blogs, you will not have to miss out on any literary goodness. So relax and enjoy the holiday season! You deserve it.

the doctor Wants To Know Why You Don’t Have A Talent Strategy

As I pointed out this weekend, the global war for talent is about to intensify – and if you don’t act now, you might not have time to. The US alone is facing a workforce shortage of 10 million by 2010, your high-tech workforce would rather stay in India, and Europe has finally recognized that if they don’t make immigration for skilled workers easier, they might not have any left, and have created a new type of renewable permit to allow people to relocate and live there quickly and easily.

So why don’t you have a talent strategy? Especially since taking a first shot is not that hard. As long as you realize that all most people today want is greater flexibility, personal growth, career paths, opportunity, open communication, and competitive pay, and as long as you make it your mission to treat people with the fairness and respect they deserve, it’s pretty straight-forward to come up with a multi-pronged strategy that is bound to be effective, especially when most of your peers are still in the dark ages and believe that the labour is nothing more than “human resources” who can be hired and fired like most farmers buy and sell cattle.

For instance, even if you just instituted the following principles, you’d be on your way to a good talent management (and acquisition) strategy (since good people attract good people).

  • Everyone has multiple career paths open to them.
    For example, every developer, if that is their ultimate career goal, has a chance of working their way up to at least CTO. However, if all they want to do is code, they have a path for working their way up the seniority ladder where they can eventually have their choice of new development project and role on the development team (as well as a huge salary – since your best programmer can be more than twenty times as effective as your average programmer). And every buyer has a career path right to the top spots – CPO, and maybe even CEO.
  • People can work where they want to, and within reason, when they want to.
    If they’re not a morning person, or regularly have to hold calls with suppliers half way around the world then, except for some common meeting hours each week, they should be able to choose when they work. Similarly, if your best developer is a night owl and does his best coding between 8 pm and 2 am, let him work a night shift. Your goal is not where or when your staff works, but the results they get. As long as they’re putting in the effort and making a commitment, whether or not they work when you work doesn’t matter.
  • With the exception of the C-suite, every job function is open to full-time, part-time, seasonal, and consultant labor.
    Let’s face it, if all the boomers retire when they turn 65, you’re average large organization is going to be hit with a double whammy it might not be able to recover from. First, it might not be able to replace even half of those workers due to the extreme talent crunch. Secondly, most of it’s knowledge – the intangible that might be accounting for 10, 20, 30, or even 50% of a company’s value – will walk out the door with the retirees. To continue succeeding, it needs to ensure that knowledge is transferred and that key relationships don’t dissipate with their departure. This means it needs to allow these individuals in particular to work part-time on their schedule to make sure the knowledge gets transferred and the relationships stay in tact after the new hire is made.
  • Furthermore, no one will be penalized for not working a traditional full-time job.
    If you have a pension plan, a recent retiree will not be penalized for contracting with you on occasion to help transfer knowledge or lead key initiatives that really require the experience of a grey-beard. Part-time employees will also have access to benefits like health-care and daycare support. (The company sponsorship of these benefits can be less for part-time employees, as these benefits are costly, but these employees should not be denied access to their fair share of any company benefit.)
  • Everyone gets regular access to subsidized training.
    With your average technical undergraduate degree partially outdated by the time it is granted, regular training is a must. A full time employee will get an allowance of at least four weeks a year to spend in classes, at conferences, or on their own reviewing e-learning courses and materials. Furthermore, they will also have a budget to spend on non-company training related to their job requirements.
  • An emphasis is made on local leadership at the national level and international leadership in the C-suite.
    Let’s face it, your employees in India don’t want to be led by a Texas Cowboy with no knowledge of their language or culture and no interest in getting to know the local ways. If you want to attract and retain top talent in a developing economy where new jobs are being created every day and where wages are rising at four or five times the annual rate in the US, you need local leaders. Furthermore, if you really want to understand how to compete in a global economy, you better have a senior leadership team in your virtual head office that is familiar with that economy. The US is less than 5% of the world’s population, and that number is shrinking. To go global, you have to be global.
  • Everyone’s compensation is reviewed annually with the intent of insuring that every one who makes an honest effort and functions at the market level is indeed earning at least market-average pay.
    Although it may be true that it’s not always about pay these days, it’s also true that it’s still the most significant factor when it comes to talent retention and acquisition. After all, all other things being roughly equal, wouldn’t you take the job with higher pay?

Now, there is a lot more you could do, and a lot more you should do, but you have to start somewhere. And I think this is a good starting point.

the doctor Goes Mental On Optimization Myths

In my last post, I went mental on three of the most dangerous myths out there with respect to e-Auctions. In this post, I’ll attack some of the more brain-dead myths that are out there with respect to optimization. For more great information on decision optimization, I recommend checking out the e-Sourcing Wiki [WayBackMachine] paper (Strategic Sourcing Decision Optimization: The Inefficiency Eliminator) that was originally authored by the doctor, the doctor‘s joint podcast with Next Level Purchasing (Parts I and II and Free Transcript with Editorial Notes brought to you by Sourcing Innovation and Next Level Purchasing [now the Certitrek NLPA]), and the posts in the Decision Optimization category here on this blog.

Myth 1: I need a PhD to use optimization!
It used to be the case that you needed an advanced degree to use the overly complicated command-line tools that represented the first generation of commercially available optimization products, but that hasn’t been true for quite some time. Today, companies like Emptoris (acquired by IBM, sunset in 2017) and Iasta (acquired by Selectica, merged with b-Pack, rebranded Determine, acquired by Corcentric) offer very simple wizard-driven user-interfaces that can be driven by any business analyst or sourcing professional which are often easier to use then your ERP or BI tools!

It’s literally as simple as selecting the relevant auction or RFx data, defining your demands for each item at each distribution center, identifying invalid freight lanes, specifying supplier capacity restrictions, identifying any business rules (such as dual-supply, 70-30 split) and defining any discounts or “preferred award” valuations (if I buy from Quality Delivered, the joint marketing campaign will be worth $10K). Then you click “optimize” and the optimal award for your scenario is spit out. If you don’t like it, you can copy the scenario, add or remove some constraints, and see what your idea of an optimal award is costing you and make the smart decision.

Myth 2: I can’t afford optimization! It’s too expensive!
Having been involved in this industry for a while, I know that early solutions were very expensive – usually starting in the seven figure range for an average company. But that’s true for every new generation of technology, software or hardware, it’s costly at first, as companies need to recoup their massive R&D investments, but gets cheaper over time. Today, a mid-size company can get a true enterprise quality strategic sourcing decision optimization solution for its sourcing department starting in the quarter-million to half-million six-figure range – and this will include a (shared) C-Plex license and (shared) dedicated hardware resources if they use an on-demand model such as that offered by Iasta.

Myth 3: My problem’s too large / complex for optimization.
Again, the technology has come a long way in the last decade. Not only can massive problems (which couldn’t have been solved in months a decade ago) now be solved in a matter of hours, but the types and quantity of constraints available have greatly increased. If your model is truly humongous, just remember that both CombineNet (acquired by Jaggaer) and Algorhythm regularly solve problems that take millions of variables and hundreds of thousands of equations to specify. As for complexity, even the solution by the relative newcomer, Iasta (which has adopted a best-to-market strategy) supports the four basic categories of constraints required for true decision optimization (capacity, allocation, risk mitigation, and qualitative), flexible discounts that will allow you to implement just about any cost structure you can devise, and freight costs for a true total landed cost model (as you can also define adjustments to capture utilization costs).

Myth 4: We’re very sophisticated when it comes to e-Auctions. We’re not going to save enough money with optimization to make it worthwhile.
Wayne Campbell said it best when he said and perhaps monkeys will fly out of my butt!“. Although it’s theoretically possible that you could be making the perfect buy – every time – without any decision optimization, in reality, the chance that this is true is about as close to 0 as you can get. I’ve NEVER encountered a situation where optimization didn’t provide a company with a cost savings opportunity in any moderately complex bid (and, these days, what bid is not moderately complex?). Furthermore, Aberdeen has found, both in their 2005 study AND their 2007 study, that advanced sourcing and negotiation methods, which includes decision optimization, saves a company an average of 12% beyond what they would save just using e-Auctions. That’s a lot of cash you’re leaving on the table.

There are more myths, but this is a good start – and hopefully enough to convince you to check these solutions out. Decision optimization for strategic sourcing is worth the investment.

the doctor Would Like To Remind You That Any Balloon Will Pop Under A Sufficient Pressure Differential

I don’t care what it’s made of – there isn’t a container in existence that won’t explode if filled to a point where the internal pressure exceeds the external pressure by a sufficient amount. Remember the second law of thermodynamics – the entropy of an isolated system not in equilibrium will tend to increase over time, approaching a maximum value at equilibrium .

In free-market economics we have a similar law, called the law of supply and demand which predicts that in a competitive market, price will function to equalize the quantity demanded by consumers and the quantity supplied by producers, resulting in an economic equilibrium of price and quantity . Taken to extremes, it means that if prices skyrocket, demand plummets, falling to zero at the extreme. This holds true in the stock market as well, as it’s a free market where the good is ownership.

That’s why we have boom and bust cycles and why an unrestricted boom is guaranteed to result in a spectacular bust. There comes a point where investors en-masse are going to decide that the price is just too damn high and want out, even if we don’t know what that point is in advance. That point is much more likely to be hit if share prices rapidly skyrocket. If this happens market-wide, due to a sizable increase in invested capital in a short time-frame, we have a boom. If the boom continues unabated, a bust is guaranteed.

So, needless to say I was quite annoyed to see an article titled “Emerging Market Mania: Is It Different This Time” on the Knowledge @ Wharton site (one of my favorite publications) – because the answer is bloody obvious. It’s not different! It’s never different! The laws are immutable! As long as we use a system of measurement that places a finite value on the GDP of each nation, the sum of the GDP for all nations is going to be finite. This guarantees that there will exist a point in each stock market, and each stock, where the price will be too high for the average investor, and these investors will want out en-masse. When this happens, you have a bust. “Market Mania” is always bad! Participating in market madness again and again is equivalent to putting your hand on that hot burner again and again. You’re going to get burned. That’s not going to change! And don’t give me that “it’s a different company” or “it’s a different market” bullshit as your excuse. The fact is that any burner on the stove will burn your hand just like any burner on any stove will burn your hand.

So, before you go diving into a market everyone else is diving into, be sure to do your homework and make sure it’s a justified move. If a market is extremely under-valued or under-served or has a considerable excess of supply, then it will be able to support a large influx of competitors and currency. However, if it is over-valued or over-served or does not have enough supply to meet current demand, any investment or entry by any organization is a very bad idea and you never know what entry is going to be the entry that causes the market to reach the tipping point and start the rapid downhill slide from boom to bust.

If you’re wondering why I’m rambling on about the inevitable bust that’s sure to follow an irrational boom, just remember that it’s not just finance that needs to worry about market valuations – supply management has to as well! The financial strength of your supplier is at least partially dependent on the financial strength of the market it’s shares are traded in or on the strength of the local economy. From a risk management perspective, the financial strength of your supplier is a key factor in terms of evaluating how much risk an award to that supplier poses – and any supplier in a risky market is going to carry a certain amount of risk.

Before I conclude this blogologue, I should point out that the article did have some good points. It pointed out that emerging markets cannot be evaluated en-masse – each is distinct and needs to be evaluated on its own. It stated the need for differentiation between emerging markets like Brazil, Russia, India, and China (the “BRIC”) and the frontier markets like Egypt, the Balkans, Bangladesh, and parts of Africa that could be the next investment hotspots. It noted that countries with abundant natural resources will likely experience an economic boom for the foreseeable future (thanks to increasing demands from the developing economies). And it noted that knowing where to go next with investment capital is always a challenge.