Category Archives: Market Intelligence

If Even a Canadian TelCo Can Use Payables to Add $3 Million To Their Bottom Line

Imagine what your company could do with invoice automation. As per this recent article over on Shared Services Link on how to turn payables into an opportunity and add $3M to your bottom line, Telus, a 10 Billion telecommunication products and services provider which typically receives 15,000 to 20,000 paper invoices per month, implemented a supplier portal, electronic invoicing, and a dynamic discounting solution that allows them to save 3 Million annually.

When you consider that 10 Billion is big, but not that big these days, that a lot of organizations receive 15,000 to 20,000 paper invoices a month, or more, and that a supplier portal is pretty primitive from an automated invoicing viewpoint, you quickly see that there is quite a lot of opportunity for your organization to save quite a lot of money from invoice processing. In some organizations, the overhead alone from manual processing exceeds a million dollars, and this barely covers a detailed review of 10% to 20% of the invoices. Proper automation insures m-way matching on 100% of invoices with exception-based processing on the 10% to 15% that contain issues or errors.

You see, when you implement the right invoice automation solution:

  • 98%+ of all invoices flow through the system,
  • 99%+ of all errors are caught,
  • 90%+ of all invoices are automatically processed without human intervention, and
  • 80%+ process savings are realized and maintained.

And then, instead of spending $30 to $40 to process an single invoice, you’ll be spending $3 to $4. So, if your organization is processing 10,000 invoices a month, you’ll see your overhead costs drop about $300,000 and you’ll save upwards of 3 Million a year before dynamic discounting or other supply chain financing solutions are put into the mix!

For more information on how your organization can save 3 Million, download Sourcing Innovation’s recent white-paper on An End-to-End Invoice Automation Framework – Ten Keys to Success (registration required), sponsored by Nipendo.

Top 12 Challenges Facing India in the Decades Ahead – 04 – Behavioural and Social Norms & Castes

As we have demonstrated in the last 9 posts, India has some serious challenges ahead of it. And despite the severity of the challenges like education, health care, and even sanitation, it has even bigger challenges still. The first of these, that we will address in this post, is the social norms.

The first challenge is with the general populace. For example, as Dreze & Sen chronicled in An Uncertain Glory, if asked, due to the fact that there is a model (if not an effective one) for bringing public health care to the rural areas and a growing private industry where you can presumably get what you need when you need it (if you can pay for it), most Indians believe they have reasonable access to health care. Given the considerable number of deaths from infection, the very high citizen to physician ratio, and the average number of people each health care center needs to serve, this is not the case. Secondly, due to the lack of progress on education, and the fact that 10 years after the first PROBE study there is still a significant lack of teaching days, there is obviously an opinion that the education being received by the average Indian child is adequate, which is a perception that is far from reality. There should not only be an uproar about the lack of teachers in some districts (as one per school clearly is not enough given the size of India’s population), but also an uproar that these highly paid individuals are absent 20%+ of the time!

The second challenge is with the government. The government doesn’t want to tackle tough issues, and certainly doesn’t want to take any steps that might cause a considerable backlash from any group of a significant size. Plus, if you look at the relative spending on health care and education in India versus other BRIC countries (Source: World Bank), total spending in India on health care (including the private sector) is a mere 3.9% versus 5.2% in China and 8.9% in Brazil, largely due to the fact that the public sector spend on health care is 1.2% of GDP compared to China’s 2.7% of GDP. If you look at Education, India spends a mere 3.1% (Source: Wikipedia) compared to China’s 3.9% (Source: Xinhuanet) and Brazil’s 5.1%. India is not adequately spending to address it’s most fundamental problems.

Government spending in India for 2013 is estimated at 302 Billion USD while revenues are projected to be 210 Billion USD. While that’s not a lot considering that India has over 1.2 Billion people, it’s still enough to do something. So where is the Indian Government spending its money? If you look at the Budget at a Glance as posted on the Government of India Site, over 1/3rd (37%) of the non-capital non-plan expenditures, which constitute almost 60% of projected expenditures, are going to interest payments and prepayment premium (370,684 crore of 992,908). The next biggest category (at 23%) is subsidies (231,084 crore of 992,908). The third biggest category (at 12%) is defence services (116,931 crore of 992,908). Grants make up 8%, pensions 7%, and the police make up 4%. The budget is rounded out by economic services at 2.4%, general services at 2.3%, and social services at a whopping 2.3%. (Taking us to 98.5% of the budget.) The remaining categories consisting of the postal deficit, the NDRF (National Disaster Relief Fund), union territory expenditures, and foreign government grants collectively amount to about 1.5%. Of the plan expenditures, all of the non-capital expenditures (27%) go towards the central plan and central assistance. In other-words, relatively speaking, India is spending too much on servicing its debt, paying its pensions, and defending its country and not nearly enough on education, health-care, and other economic assistance to lift the majority of its population out of near-poverty — a population it needs educated and healthy to take on China.

The third is with the media. As per Dreze & Sen’s An Uncertain Glory, among more than five thousand articles published on the editorial pages of India’s leading English-medium dailies during the last six months of 2012, less than 1% of the total editorial space was dedicated to health-related matters, and that was with a very broad definition of “health-related matter”. As we will discuss in more detail in a future post, the media really needs to spend more time on critical issues like health care, sanitation, and education.

The (Board) Gamer’s Guide to Supply Management Part X: All Creatures Big and Small

You want to prove that you’re the best at managing an industrial farm at the back-end of agricultural supply chains, but you can’t get enough of your team-mates together for a raising game of Agricola. Don’t worry! Thanks to Z-Man Games, you can have a one-on-one game of Agricola: All Creatures Big and Small and out-farm your cube-mate to your heart’s content!

Based on the original Agricola, All Creatures Big and Small was designed as a simpler alternative for only 2 people. (Even though the original could be played by 2 people, it was designed specifically for 3-5 players, and 62 of the occupation cards in the full game — which we’ll get to once you’ve had time to figure out the basic game which is more involved and complex than you think it is,just like the back-end of a real agricultural supply chain — can only be used if there are 4 players.)

The 2-player game is simpler to learn than the full game (but just as hard to master, especially if you get the expansions). The number of actions you can take in each round are fixed, whereas the number of actions in the full game depend on the number of family members you have; the focus is on raising animals, building fences and stables to hold them, and other special buildings and you don’t have to balance this with growing crops and producing food like in the full game; and there are no cards to deal with, only special buildings. It’s quick to learn, but still hard to master because, as with the full game, only one player can take an available action and if you don’t build your pens or stables in time, you can’t breed more animals — and while special buildings and farm expansions can give points, many of the points depend on the size of your flock. Plus, if you believe the game is getting too easy for you, there are two expansions: “More Buildings Big and Small” and “Even More Buildings Big and Small” that add a total of 54 more special buildings to make your game even more unpredictable, just like farming in the real world (as each building has an ability, just like each supply chain professional you could hire brings a different skill, and you can’t build them all, just like you can’t hire afford to hire too many people, so you have to find the right mix of buildings that give your farm that right mix of capabilities just like you have to hire the right mix of professionals in the real world with skills that complement each other and make the team as a whole greater than the sum of its parts).

In this 2-player version, you start the game with a farm board and a cottage that can hold one animal and 9 borders, which you can place when you select the fencing action, provided that you have enough wood to place those borders.

The game is played over 8 rounds and each round consists of 4-phases.

  1. Refill: Refill the indicated spaces on the game board with the goods printed on them. Every round, more wood and stone becomes available to be retrieved from the mill or quarry.
  2. Work: Take turns placing each of your three workers on available actions.
  3. Return Home: Your workers return home for the next round.
  4. Breed: At the end of the round, if you have at least two animals of the same type, and room for one more animal of the type, you breed one new animal of the type.

The available actions are:

  1. 1 wood: Acquire all wood in the 1-wood resource space and become the start player next round.
  2. 3 wood: Acquire all wood in the 3-wood space. (Just like in the real world, the first person to market often gets the most goods at the best price when demand exceeds supply.)
  3. 1 stone: Acquire 1 stone.
  4. 2 stone: Acquire 2 stone.
  5. Fence: Build as many borders as you can at the cost of 1 wood each. Each enclosed pasture can hold 2n animals of the same type, where n is the number of spaces that are enclosed.
  6. Wall: Build two free borders and pay 2 stone for each additional border you wish to build.
  7. Building Materials: Acquire 1 wood, 1 stone, and 1 reed.
  8. Expand: Take a farm expansion that allows you to expand your farm (which starts with 6 fields 3 more fields).
  9. Stall: Build exactly one stall for 3 stone and 1 reed. A stall can hold 3 animals of the same type.
  10. Stable: Upgrade one stall to a stable for 5 wood or 5 stone. A stable can hold 5 animals of the same type.
  11. Feeding Trough: Build one trough for free, and additional troughs for 3 wood each. A trough doubles the number of animals that can be kept in the pasture or building it is located in.
  12. Special Building 1: Pay the building costs and put up a special building. Each special building does something different. For example, the open stables gives you one free animal and bonus points at game end; the half-timbered house replaces the cottage, gives you bonus points, and holds two animals instead of one; the shelter, which can hold one animal, gives you one free animal; and the storage building stores resources and allows you to gain points from them (as they are kept in pristine condition and can be resold at the end of the game if not used).
  13. Special Building 2: Pay the building costs and put up a special building.
  14. Millpond: Harvest a reed and capture any sheep near the pond.
  15. Pigs and Sheep: Capture the pig and any sheep on the space.
  16. Cow and Pigs: Capture the cow and any pigs on the space.
  17. Horse and Sheep: Capture the horse and any sheep on the space.

Sounds simple enough, but, just like in Agricola, you’re managing an industrial farm at the back-end of an agricultural supply chain, but unlike Agricola, you’re only managing the stables. The amount of animals you can raise depends upon the number of separate pastures, stalls, and stables you have, how many troughs you have available, how many workers you have to build, how many resources you have available to put up fences and buildings, and how many special buildings you have that give your workers additional capabilities. And, as in the real world, winning isn’t just profit, it’s sustainability and depends on a number of complex factors that influence your performance over time.

Are you a better agricultural supply chain manager? Play All Creatures Big and Small and see if you can best your cube-mate, and when you think you’ve mastered it, switch back to the full game, break out the full version, and start preparing yourself for the ultimate supply management challenge (which this series is leading up to — given that the majority of the market is still, depending on the analyst firm you ask, less than halfway up the ladder, we have to first give your peers a chance to take their supply chain game up a couple of rungs).

Top 12 Challenges Facing India in the Decades Ahead – 05 – Sanitation

Sanitation in India is a major problem. The fact that India is 13th among a list of the 16 countries outside of sub-saharan Africa that are poorer than it in the rankings does not do the severity of the problem justice. As we noted in our post on Poverty, in India, 55% of households practice open defecation. In comparison, in Bangladesh, which has half of the GDP of India per capita, only 8.4% of the population practices open defecation.

Moreover, only 88% of the population has access to an improved (clean) water source (for drinking). In rural areas, the statistic is even worse — 84% (compared to 96% in urban areas). That’s 16% of the population without even access to clean water. For an emerging country, this is a disgrace. In China, a country with three times the land area, the statistics are 98% and 85% (and 91% overall). Why is it so bad? Well, for starters, as of 2010, only two cities in India — Thiruvananthapuram and Kota — get a continuous water supply (which is a situation that needs to change).

This is a huge problem. Even worse than the health care situation. When you get right down to it, if more people had access to sanitary conditions, communicable diseases and infections, which account for a percentage of deaths that is (at least) 20 times the percentage of deaths that communicable diseases and infections should account for, wouldn’t be so widespread. (People can’t die from a communicable disease or infection they don’t get, and the number one way to stop the spread of communicable diseases and infection is better sanitary conditions and sanitary practices.) With respect to diarrhoea, 88% of deaths occur because of unsafe water, inadequate sanitation and poor hygiene.

Sewerage, where available, is usually in a bad state. In Delhi, for example, the sewerage network has lacked maintenance over the years and overflow of raw sewage in open drains is common, due to blockage, settlements and inadequate pumping capacities. The capacity of the 17 existing wastewater treatment plants in Delhi is only enough to process about 50% of the waste water produced. Across India, the most recent estimate (in 2003) was that only 27% of India’s wastewater was being treated, with the remainder flowing into rivers, canals, groundwater or the sea. Abysmal!

Just how bad is the situation? Consider this passage from Wikipedia:

For example, the sacred Ganges river is infested with diseases and in some places the Ganges becomes black and septic. Corpses, of semi-cremated adults or enshrouded babies, drift slowly by. NewsWeek describes Delhi’s sacred Yamuna River as “a putrid ribbon of black sludge” where the concentration of fecal bacteria is 10,000 times the recommended safe maximum despite a 15-year program to address the problem. Cholera epidemics are not unknown.

Plus, the continuing depletion of ground water tables and the continuing deterioration of ground water quality are threatening the sustainability of both urban and rural water supply in many parts of India. India can’t afford to pollute any more of its water supply and needs to get waste water treatment under control rapidly. Otherwise, health care problems are just going to get worse, and the repercussions will be substantial.

Nine Rules for Insuring the Dash For Cash

CFO World recently published a short piece on “ending the dash for cash” in which they outlined then steps to success that an organization can take to help shrink working capital in which they got it all wrong.

Good working capital management doesn’t shrink working capital, it enlarges it. So, in the spirit of Mark Perera’s “Nine Rules for Stifling Supplier Innovation” (Old St Labs), Sourcing Innovation gives you nine rules for insuring that you will eventually have to dash for cash to keep your business afloat.

  • Focus on recently overdue accounts. If the customer has a history of paying on time, but just missed a payment or two, even though chances are they just screwed up because they haven’t implemented proper e-Invoice Management and temporarily misplaced your invoice, call them up and give them a stern lecture on how deeply disappointed you are in them.
  • Insist that there is no acceptable excuse for late payment. Even if the excuse is that the customer is disputing the amount you charged them because you failed to apply a discount or mistyped the quantity they actually received (because there is no integration between your shipping system and billing system and a data entry clerk has to key in quantity). Insist they should pay now and you will resolve the dispute later.
  • Never change your standard payment terms. They worked ten years ago, why shouldn’t they work now?
  • Pay on your terms, no matter what. Who cares that the supplier has to borrow at 20% annual compounding interest to float your 120 day payment terms. That’s their problem, right?
  • Don’t fret the inventory. If sales ordered it, they’ll move it when they’re good and ready. It’s not your problem, it’s the COO’s.
  • Forget next quarter. Wall Street is only going to judge you on this quarter, so do whatever you can to put the books in the best possible light, especially if it’s year end. You’ll figure out next quarter when next quarter arrives.
  • Link performance measures to year-over-year profit. Again, that’s all Wall Street cares about, so forget about those pesky savings targets, sustainability initiatives, or long term cost reduction measures. They never materialize anyway, right?
  • Focus on quarter-over-quarter cash on hand and net income reporting. Reporting on increases in current and future liabilities just dampens everyone’s mood unnecessarily.
  • Don’t be a sucker for early payment discounts. It lowers your cost, but it lowers your cash on hand even more — and that’s what Wall Street will judge you on.

Follow these rules and I ensure you that, sooner or later, you will be making a dash for cash.