Category Archives: Market Intelligence

On the Subject of Trade Treaties, Continued

On Tuesday, when we noted that Russian (Border) Trade Agreements are nothing new, we pointed out that it was the Six Hundred and Ninety First anniversary of the Treaty of Noteborg. Then, yesterday, when we wrote on the subject of Historical Trade Treaties, we noted that it was the Two Hundredth Anniversary of the Anglo-Dutch Treaty of 1814, also known as the Convention of London.

The reason for these posts were to point out a number of things:

  • Trade, Treaties, and Embargoes are nothing new,
  • Today’s trade agreements and partners are not necessarily tomorrow’s trade agreements and partners,
  • The outcomes are not always what you would expect.

Trade, Treaties, and Embargoes are nothing new

Written peace treaties, with economic ramifications, have been around for at least 4,500 years. For example, archaeologists have found clay cylinders dating from about 2,500 BC that record a treaty between the two Sumerian cities of Lagash and Umma that were looted 18 miles apart. The second cylinder describes a one-time penalty of 144,000 gur of grain that Umma had to pay Lagash.

And while the Continental System was one of the most comprehensive attempts at an embargo throughout all of history, the concept of an embargo, which is the partial or complete prohibition of commerce and trade with a particular country, the origin of the embargo is in the blockade, which was initially designed to cause military exhaustion and starvation, but which evolved over time to target the populace (to build internal dissension in the enemy) as well as the military. And blockades have been around for over 2,500 years. For example, back in 458 BCE, the Athenians blockaded the island of Aegina in the Saronic Gulf during the first Peloponnesian War.

Trading Agreements and Partners are in constant flux

A trading agreement generally only lasts as long as the agreement is beneficial to both parties. Once it is no longer beneficial, one of three things will generally happen:

  • it will be executed minimally to completion, if it ends soon,
  • it will be renegotiated, if it doesn’t end soon but both parties want to maintain a relationship, or
  • it will be broken, and one or both parties will risk penalty or retaliation because they feel it can’t be worse than the current agreement.

The outcomes of a Trade Agreement, Treaty, or Embargo are not always what you expect

In the case of an agreement, the agreement might go exactly as planned. The first party might deliver to the second party the exact quantity of goods specified for the exact duration specified in the agreement, and then stop. The agreement might work out so good for both parties that they double down and trade even more. Or, it might work out so bad that they almost immediately negotiate an end to the agreement.

In the case of a treaty, it might strengthen relations or it might weaken relations.

But in the case of an embargo, the exact opposite of what is desired can happen. It might be the case that all parties in the coalition respect the embargo and stop trading the designated goods and services to the party for which the embargo applies. And it might be the case that some parties in the coalition refuse to respect the embargo and continue to trade with the embargoed party anyway.

But even if the first case is the reality, it is not necessarily the case that the embargo will have the desired effect. It could be the case that the embargo, designed to weaken a party, actually strengthens a party. Sometimes the ancient* proverb is right and the enemy of my enemy is my friend and the embargo, instead of hurting the intended party, causes them to strengthen their trading relationship with another party and makes two parties you want weakened stronger.

And, going back to Tuesday’s post, just like the Continental System backfired on France, as it only made Britain and Russia stronger when Russia started trading with them again in 2010, any embargoes on Russia, which is no longer the Super Power they once were, is just going to backfire on any western country that hopes that the embargo is going to weaken Russia. All the embargo is going to do is strengthen Russian ties with its Middle Eastern and Asian neighbours, and China in particular. The New Silk Road will be here sooner than you think.

So what does this mean for your Supply Management Organization?

* An early expression of this concept is found in a Sanskrit treatise on statecraft dating to the fourth century BC.

Could You Be Doing It Right? Part III: Big Data

In last Friday’s post, we asked if you were doing it wrong. In particular, we mentioned category management, supply chain risk monitoring, and big data, and asked if you were doing them wrong. We noted that even though a number of companies have jumped on these runaway bandwagons, most have yet to grasp the reigns and take control of the wagon and get it on the right track.

Why is that?

Fundamentally, it’s the same reason that there are no world class Procurement Organizations in Asia Pacific — the classic Triple-T problem.

  • Talent
    the organizations don’t have the right talent to properly manage the initiative
  • Technology
    the organizations don’t have the right platforms to capture the right data and support the right processes
  • Transition Management
    the organizations don’t have the right processes in place to handle the necessary organizational shift to properly manage the initiative

Once the talent, technology, and transition management is in place, the organization has what it needs to fully embrace the initiative and take it to the next level. And do it right.

Where should your Supply Management Organization start? By identifying the core capabilities that are required in each “T” category and finding the right talent, technology, and transitions management for the initiative, the organization will be well on its way.

In the rest of this post, we’re going to talk about the requirements for an organization to get on the right category management track.

Talent for Big Data

Good big data scientists need the following hard and soft skills:

  • Algorithms
    there’s no magic algorithm where big data is concerned as every problem is unique and requires a unique (variant of an) algorithm
  • Domain Knowledge
    the scientist needs to know when she can be confident in the data and when she can’t; if there is not enough data, or the data is too random or skewed from expected patterns, then the scientist needs to know to trust judgement over data
  • Technical Skills
    the scientist needs to use sophisticated tools to perform her analysis
  • Logic
    the data, and algorithms, are very precise and the data scientist needs to be as well
  • Teaching
    since the majority of organizational employees will not understand what the big data scientist does, she will have to be able to explain what is needed data-wise, what the meaning of the results are, and how confident the organization can be in the results in simple terms
  • Perseverance
    since big data isn’t as simple as just dumping a bunch of data into an algorithm and accepting the result; the first, second, and tenth try won’t always generate a useful result — sometimes the data scientist, like an archaeologist, has to dig, dig, dig

Technology for Big Data

Appropriate technology platforms for big data will have at least the following features:

  • Big Data Stack
    You need an infrastructure that is scalable, replicable, and fault-tolerant.
  • Domain Specific Algorithms
    That can run on the stack and analyze the right data in the right way to generate some useable facts.
  • Powerful Reporting Engine
    That can not only generate reports useful to the scientist but to others in the organization.
  • Powerful ETL Middleware
    As you will need to extract, transform, and load data from a wide variety of sources.

Transition to Big Data

In order to transition to an organization that properly uses big data, the organization needs to hire someone with good change management skills and give that person the tools and C-suite support he or she needs to get it done. That person also needs to be a natural born leader and someone who can work with teams to get it done.

This isn’t a complete (laundry) list of what is required for big data, but it’s a good starting point. Get the right talent, technology, and transition management in place, and your organization will be well on its way to big data* success.

* Especially if you hire a good big data scientist who recognizes that sometimes the data doesn’t have to be all that big to derive a useful fact!

Could You Be Doing It Right? Part II: Risk Monitoring

In last Friday’s post, we asked if you were doing it wrong. In particular, we mentioned category management, supply chain risk monitoring, and big data, and asked if you were doing them wrong. We noted that even though a number of companies have jumped on these runaway bandwagons, most have yet to grasp the reigns and take control of the wagon and get it on the right track.

Why is that?

Fundamentally, it’s the same reason that there are no world class Procurement Organizations in Asia Pacific — the classic Triple-T problem.

  • Talent
    the organizations don’t have the right talent to properly manage the initiative
  • Technology
    the organizations don’t have the right platforms to capture the right data and support the right processes
  • Transition Management
    the organizations don’t have the right processes in place to handle the necessary organizational shift to properly manage the initiative

Once the talent, technology, and transition management is in place, the organization has what it needs to fully embrace the initiative and take it to the next level. And do it right.

Where should your Supply Management Organization start? By identifying the core capabilities that are required in each “T” category and finding the right talent, technology, and transition management for the initiative, the organization will be well on its way.

In the rest of this post, we’re going to talk about the requirements for an organization to get on the right supply chain risk monitoring track.

Talent for Supply Chain Risk Monitoring

Good risk managers need the following hard and soft skills:

  • Analysis
    On what services, products, components, and raw materials is the organization (most) dependent and which of these are sole-sourced and/or in scarce supply.
  • Mapping and Modelling
    What does the multi-tier supply chain look like and how can it be represented in software?
  • Mitigation Planning
    If a certain raw material, component, product, or service becomes temporarily, or even permanently, unavailable, what other options can be put into action?
  • Insight
    The greatest risk is always where you least expect it. You will need someone with great insight to not only determine what types of risk you may face, but how your organization can most effectively monitor for them.
  • Sportsmanship
    You will need a great team player to bring it all together.
  • Crisis Management
    When the proverbial sh!t hits the fan, and the organization goes into panic, you need a strong, level-headed crisis manager to get them back on track quickly, and without loss.

Technology for Supply Chain Risk Monitoring

Appropriate technology platforms for risk monitoring will have at least the following features:

  • Supply Chain Mapping
    the platform should map your supply chain multiple tiers down to the source raw materials for any raw materials you are dependent on
  • Event Monitoring
    the platform should identify any natural or man-made disasters that can disrupt your supply chain
  • Mitigation Planning
    the platform should allow the risk manager to put together plans of action should any required part or raw material become unavailable
  • Response Management
    the platform should allow the incident management team to manage the response to a disaster when it occurs
  • Mobile Interface
    as people need to be able to access the platform from anywhere, wherever they are, as the disaster could take out your primary offices

Transition to Supply Chain Risk Monitoring

In order to transition to a proper supply chain risk monitoring framework, the organization needs to hire someone with good change management skills and give that person the tools and C-suite support he or she needs to get it done. That person also needs to be a natural born leader and someone who can work with teams to get it done.

This isn’t a complete (laundry) list of what is required for proper supply chain risk monitoring, but it’s a good starting point. Get the right talent, technology, and transition management in place, and your organization will be well on its way to risk management success.

Could You Be Doing It Right? Part I: Category Management

In last Friday’s post, we asked if you were doing it wrong. In particular, we mentioned category management, supply chain risk monitoring, and big data, and asked if you were doing these three thing wrong. We noted that even though a number of companies have jumped on these runaway bandwagons, most have yet to grasp the reigns and take control of the wagon and get it on the right track.

Why is that?

Fundamentally, it’s the same reason that there are no world class Procurement Organizations in Asia Pacific — the classic Triple-T problem.

  • Talent
    the organizations don’t have the right talent to properly manage the initiative
  • Technology
    the organizations don’t have the right platforms to capture the right data and support the right processes
  • Transition Management
    the organizations don’t have the right processes in place to handle the necessary organizational shift to properly manage the initiative

Once the talent, technology, and transition management is in place, the organization has what it needs to fully embrace the initiative and take it to the next level. And do it right.

Where should your Supply Management Organization start? By identifying the core capabilities that are required in each “T” category and finding the right talent, technology, and transition management plan to support the initiative, the organization will be well on its way.

In the rest of this post, we’re going to talk about the requirements for an organization to get on the right category management track.

Talent for Category Management

Good category managers need at least the following hard and soft skills:

  • Analysis
    to determine the volume and spend in the category
  • Modelling
    to determine the major cost components, and cost drivers, of the major products or services in the category
  • Commodity Market Expertise
    in the major raw materials and commodities used in the production of the major products in the category
  • Stakeholder Management
    as savings and performance improvement will usually come from consolidating related items with a smaller set of suppliers, which is going to ruffle some feathers when some departments lose their coveted suppliers and supply relationships.
  • Negotiation
    since not only will the individual need to consolidate a set of commodity purchases with a single supplier, but the individual will also need to cut a good deal and maybe even convince the supplier to take some business it normally wouldn’t want
  • Change Management
    since good category management typically requires changing the way the organization conducts business today

Technology for Category Management

Appropriate technology platforms for category management will have at least the following features:

  • Spend Analytics
    with extensive aggregation, cubing, and filtering capability
    as the category manager needs to not only extract volume and spend, but identify related products and services based on components, raw-materials, and sub/related services
  • Should Cost Modelling
    which allows the category manager to understand not only what the product should cost but the primary cost components and the appropriate inputs to an optimization model
  • (Real-Time) Market Data
    which allows the category manager to track historical market trends and predict future prices to time the market if prices are volatile
  • Supplier Performance Management
    which allows the category manager to track and manage supplier performance
  • RFX
    to manage the data collection and track supplier bids and responses before and during negotiations

Transition to Category Management

In order to transition to proper category management, the organization needs to hire someone with good change management skills and give that person the tools he or she needs to get it done. That person also needs to be a natural born leader and someone who can work with teams to get it done.

This isn’t a complete (laundry) list of what is required for proper category management, but it’s a good starting point. Get the right talent, technology, and transition management in place, and your organization will be well on its way to category management success.

Are You Ready to Leave the Procurement Dark Ages? ScoutRFP Has a Simple Tool For You. Part II

In our last post, we noted that many organizations are still in the Procurement Dark Ages, conducting procurement using the age-old three-bids-and-a-buy technique and the fax machine running over a 64 kbit digital ISDN circuit. And that, in the low end of the mid-market in particular, this was the norm and not the exception. Scary!

We also noted that there were a number of reasons for this dismal state of affairs including, but not limited to, a lack of foresight and faith in Procurement by the organizations, the high price tag that used to be associated with these products, and the complexity of the suite solutions that were often thrust upon the technologically illiterate organizations that, sadly, were just not ready for sophisticated solutions.

Some companies need to take it one-step at a time, and like a kid on the beach for the first time, dip their toe in the open ocean before getting comfortable enough to walk, and eventually, dive in. To this end, Scout RFP has decided to launch a new RFP solution to help those companies, and other companies who are using RFP solutions that are overpriced or too advanced for their needs.

Does this make sense given that they are not the first company to offer a stand-alone RFX product, or at least a stand-alone RFX module, and that there are a number of companies on the market that have, or started with, this strategy? For example, EC Sourcing, ThomasNet, and PurchasingNet all offer low-end stand-alone RFX solutions that can be obtained at low cost.

Unless they do something different, definitely not. But the founders recognize this, and might find a way to brighten up the space just a little. (Time will tell.)

So what’s different about ScoutRFP? Especially considering the maturity of RFX technology? Not much, but when you consider the market they are going after, it probably doesn’t take much to make a difference to have an impact. (With the majority of players chasing the same Global 2000, there is still a big unexplored blue ocean when you move further down the corporate food chain.)

Scout RFP is currently focussed on differentiating themselves in the following ways:

1. Ease of Use

The solution is 100% web-based and designed to work with minimal inputs. Like all other modern RFX products, it guides the user through a minimal workflow to create the RFX, select the suppliers to receive the RFX, and evaluate the responses, side-by-side, when they are returned.

2. Flexibility

Whereas many solutions force the user to create an RFX section by section, question by question, the ScoutRFP solution allows the user to create the RFX at their desired level of detail. They can cut and paste entire sections from a Word document into an entire section, break it up into individual questions, or go somewhere in between.

3. Control & Visibility

It allows for the definition of hierarchical visibility and control that allows a CPO to view the work being done by his or her directors who can see the work betting done by his or her buyers.

Like other modern tools, ScoutRFX also has a dashboard view, supplier response and status tracking, and side-by-side comparisons.

And it’s brand new. The company has not officially been around for a year, and has accomplished quite a bit of development in that timeframe as well as landing over a dozen customers in that time as well. So it’s very likely that the next year will see quite a bit of new development, the creation of a knowledge and template library, and other useful advancements to jump start your dark-age Procurement enterprise.

If you’re a mid-size company without an RFX solution, it’s worth checking out. It doesn’t have all of the bells and whistles of some more established solutions, but it doesn’t have the price tag either. And the founders, who know what it’s like to be stuck without basic tools to do your job, won’t beat around the bush or try to shovel you a side of bullcrap with a modules, services, or license seats you don’t yet need. (After all, when you’re selling enterprise systems in the low five-figures, you can’t afford to!)