Category Archives: Market Intelligence

Questions to Ask your Optimization Vendor (Repost)

Not all optimization vendors are equal … and more importantly, not all vendors that claim to have decision optimization even have it (as their systems barely qualify as decision support). It’s important that you be able to distinguish between the relative strengths and weaknesses of the different products, as well as how much strength you really need, if good decision optimization is one of your driving reasons for selecting a (new) e-Sourcing solution. (And, by the way, as I have been stating since day one, it should be!)

The key with optimization is buying just what you need in the majority of your sourcing events. Optimization is still expensive compared to some other solutions, but more importantly buying too much power could severely impact your potential ROI (as it not only costs more but takes more manpower to use), and buying too little power will be equivalent of flushing that investment down the drain as it won’t solve the majority of your problems. I’m using the word “majority” because there is no general purpose decision optimization product for sourcing that will handle all of your events and solve all your problems. As with just about everything else in business, it’s the 80-20 rule. The best solution is the one that solves as close to 80% as possible at a cost of ownership that maximizes your ROI multiple. You can always do one-time projects with best-of-breed providers or specialist outsource providers for those projects in the remaining 20% where there is enough of a savings opportunity.)

Before I get to the question list, I should point out that it’s almost impossible to cover every question, as many of the questions you should be asking depend on the answers you receive to your first few questions, but I think the question list below is a good starting point.  So, without further ado, here’s the basic list!

  1. Does your product meet the four critera for strategic sourcing decision optimization as outlined in the Strategic Sourcing Decision Optimization wiki-paper (initially authored by the doctor, the all-knowing optimization king*1)? Specifically, does it support the following:
    • Sound & Complete Solid Mathematical Foundations
         such as simplex algorithms and branch-and-bound;
         many simulation and heuristic algorithms do not guarantee analysis of every possible solution (sub)space given enough time, and, thus, are not complete in mathematical terms
    • True Cost Modeling
         many bidders bid tiered bids, discounts, and fixed cost components – the model must be capable of supporting each of these bid types
    • Sophisticated Constraint Analysis
         At a minimum, the model must be able to support reasonably generic and flexible constraints in each of the following four categories

      • Capacity / Limit
           allowing an award of 200K units to a supplier who can only supplier 100K units does not make for a valid model
      • Basic Allocation
           you should be able to specify that a supplier receinves a certain amount of the business, and that business is split between two or more suppliers in feasible percentage ranges
      • Risk Mitigation
           let’s face it – supply chains today are all about risk management, and you should be able to force multiple suppliers, geographies, lanes, etc. to mitigate those risks without specifying specific suppliers, geographies, lanes, etc. to take advantage of the full power of decision optimization
      • Qualitative
           A good model considers quality, defect rates, waste, on-time delivery, etc.
    • What-if Capability
        The strength of decision optimization lies in what-if analysis. Keep reading.
  2. Does it support the creation of multiple what-if scenarios and does it simplify the creation of these scenarios?
       The true power of decision optimization does not lie in the model solution, but the ability to create different models that represent different eventualities (as this will allow you to hone in on a robust and realistic solution), to create different models off a base model plus or minus one or more constraints (as this will help you figure out how much a business rule or network design constraint costs you), and to create models under different pricing scenarios (to find out what would happen if preferred suppliers decreased prices or increased supply availability).
  3. How fast is it for different average model sizes and can performance be tweaked?
       Optimization takes what it takes. That being said, if one solution takes an average of 1 hour for an average scenario, and another solution takes 10 minutes, all things being equal, if you have compressed sourcing cycles, the 10 minute solution might be better. Emphasis on “might”. This is only true if the faster solution is of the same quality – some models, and some solvers, sacrifice quality and accuracy for speed. The best solution will let you trade off “tolerance” and accuracy for speed. Sometimes it’s easy to get within 1% or 2% in a few minutes, even though that last 1% or 2% could take hours. On a model with low total savings potential, getting within 1% may be enough. And when trying to hone in on the right what-if scenario, it’s nice to get within 1% quickly and then allow the right scenario to run to completion over night after you’ve quickly analyzed half-a-dozen scenarios and settled on your preferred scenario. Thus, tweaking ability is very important.
  4. If it supports “real-time” is it “true” real-time or “near” real-time.
       Thanks to significant advances in processor and hardware performance as well as off-the-shelf optimizer technology (like ILog’s CPlex), it’s now possible to rapidly re-build and re-solve moderately sized models using off-the-shelf modeling languages in seconds, allowing for e-auction tools that keep the model relatively small and simple to incorporate decision optimization in near-real-time by simply re-building and re-solving the model every 30-60 seconds (depending on model-size) on a high-powered dual or quad core server with an appropriately configured and optimized CPlex 10. However, this is NOT true real-time optimization and could rapidly break down if the model gets too big or too complex. (For example, real-time optimization requires the ability to merge model construction and model solution in such a way that a new bid can be introduced as a parameter change that does not require the optimizer to rebuild the sparse model matrix and start the solution process over from scratch.)
  5. Describe two or three scenarios you have encountered where you could not model the situation exactly for companies in our vertical, how you worked around the issue, and how accurate the result was.
       No optimization model can handle every real-world scenario 100% accurately. If a vendor representative says so, he’s either lying through his teeth or not competent enough to be selling the product. (Note that: I’ll have our support expert get back to you on that is a good answer from an average sales representative.) This is about the only way to get a decent idea of how appropriate the tool is for you. If the scenarios were complex and the constraints based on business rules you hardly ever, or never, use, then the solution is probably okay for you. If the scenarios were simple and the constraints based on business rules you use all the time, it’s probably not the tool for you.
  6. Can we do a pilot project before committing to a long term license?
       If you like what you hear, but are still unsure, or are having problems getting the budget approved, a pilot is often the way to go! (Note that I did not use the word “free”. You should be willing to pay for services at a rate that is sufficient to cover the provider’s cost for this pilot – especially considering that many of the companies that offer affordable optimization offerings are only able to do so because they keep their costs and overheads down – and if they gave free services away to everyone who requested a free pilot, they would have to increase their costs, and that would be a detriment to everyone, including you, in the long run.)
  7. We’re having problems understanding how this fits into our business or what the best solution for us is. Would you be willing to demo your solution to, and answer questions from, our consultant who understands both our needs and decision optimization technology?
       Let’s face it – just like the right decision optimization tool can deliver huge savings multiples on your investment (10X or more), the wrong tool will simply represent a six (or seven) figure cost that yields little return. If you can’t tell the difference, and there’s no shame in admitting you can’t if you’ve never used this type of technology before, then you should bring in a consultant who can to help you select the right technology, and ensure you are appropriately trained on it, until you are self sufficient and saving an average of 10% to 12% per project put through the tool.

The Three Things You Really Need to Know About Big Data Right Now!

A recent post over on the World Future Society on “The Three Things You Need to Know About Big Data, Right Now” annoyed me because the first thing I saw was that the data experts are organizing and they want a revolution. So what? First of all, we’re few and far between, and, more importantly:

  1. For Business, Big is, as it has always been, meaningless
    Like I said in my recent post on how There’s No Such Thing as BIG Data in Business, we’re not doing protein folding, climate modelling, nuclear simulations, supercollider data interpolation, cosmological computations, or even trying to beat Deep Blue at Chess. We’re looking for answers to everyday business problems, which comes from analyzing heterogeneous and related data, possibly through federation, and not from throwing everything into a number cruncher to see what comes out. Although you may have 100 Million transactions in your ERP, you don’t need to analyze them all at once. Analyzing all of your spend at once is akin to comparing your DVD Player to the kitchen sink to an apple. We don’t need a revolution. An evolution will do just fine.
  2. They Don’t Need Your Data
    Yes, every advertiser and his dog is going to want your data to better target you with advertisements you are more likely to look at, but you don’t have to give it. Remember, they only care about statistics anyway, and, depending on the data being collected, a sample as small as 30 can have some statistical relevance. And while economists, population researchers, and medical researchers may have a valid need for certain data items about you, you don’t have to share all your private details and can most likely keep most of your unique identifying details anonymous without impacting the accuracy of their study.
  3. The Correlations will be Uncanny but Many Won’t Matter Anyway
    While some stuff you can predict is amazing, some is not, and while it’s always frustrating to not be able to predict some behaviours and outcomes, we not only accept that as a fact of business and of life, but wouldn’t have it any other way. (There’d be no stock market if we could predict everything.) For example, it’s not unexpected that web-savvy people will be searching for “unemployment” information as soon as they get laid off. But it is unexpected that a subset of Indian Politicians and a subset of Drug Dealers would have much in common (as per this recent Freakonomics Blog Entry. And neither of these facts really helps us with anything.
    Plus, the predictions will never be perfect. Like weather and stock market models, when you try to model large-scale behaviour like consumer activity over the long term, every now and again the model will fall flat on its face.

To summarize, Big Data is like Big Cloud — full of too much hot air.

Three Questions for Job Seekers in the Supply Chain Space


Today’s guest post is from Sudy Bharadwaj, who has been analyst extraordinaire of Aberdeen Group, a VP of MindFlow Technologies (who innovated the sourcing optimization space), CMO of Informance (who brought intelligence to the manufacturing floor), and a Sales Superstar at Inovis (who was one of the largest B2B eCommerce players). (Note that all of these companies made successful exits by way of acquisition.) Sudy is currently the CEO of Hound Technologies and JackalopeJobs.com, a new Web 3.0 job search start-up that is looking to revolutionize the job search process for the average job seeker (and not the average recruiter).

Since I have been involved in the supply chain industry for 20+ years, I thought I would share some observations for job seekers in this space. One interesting fact about supply chain jobs — they are all over the map in terms of qualifications and experience. Some high-end jobs require advanced degrees and lots of experience, while others can be entry-level positions.

Regardless of level, there are some common issues all supply chain job seekers should think about:

Are you a cost center or a profit center/revenue center?
Many supply chain professionals, while knowing they have an important role, do not do as good of a job of fully understanding and articulating their overall role in their ecosystem. Think of what revenue or savings you contribute to the company. By optimizing your supply chain, how have you contributed? Can you describe some customer satisfaction metrics? Cost savings metrics?
One famous example of where you fit in the supply chain: when interviewing an assembly line worker installing seat belts at an automobile plant, the line worker told an executive “I not only install seat belts, I save lives”. That’s a great way to look at the job.

How are you managing, building and maintaining your network?
In any job search, networking is crucial, however, in the supply chain space, it can really improve your chances. In addition to connecting to your former co-workers, how about customers, suppliers, partners, etc? You were part of a supply-demand web, which looks like a large network; treat it like your job seeking network. Rather than looking for roles within your exact industry, can you work with customers and/or suppliers?
When discussing his job with a job seeker in the demand-side of the supply chain (read: sales), the main points were selling of products. The first question I asked was “tell me about your customer”.
Job seeker: “They are a distributor of XXX products”
Me: “What else do they distribute”?
Job seeker: “Numerous products, including ABC and XYZ”
Me: “Can you sell those?”
Job seeker: “Of course”
It may not be so easy, but phone calls were made to the distributor, new introductions were made, interviews ensued, and a new job was started with very different products than the sales executive sold before.

Are you addressing your skills gaps?
If you are an aspiring supply chain professional, or returning war veteran, you can find help from your local workforce office or VA representative. A great example in the Dallas/Fort Worth area is what the Workforce Solutions of North Central Texas has done — they acquired funding to develop certification programs — Certified Logistics Associate (CLA) or Certified Logistics Technician (CLT). Don’t live in the Dallas/Fort Worth area?

Try hitting Google and searching for some common phrases. Just for fun, I Googled “supply chain certification program in north Dakota” and got some interesting hits. Some are online programs from out-of-state schools while others are state sponsored programs.

These are three different questions any job seeker in the supply chain space needs to ask themselves as they embark on a new job search.

Thanks, Sudy. And if you are looking for a new Supply Chain job, try JackalopeJobs.com.* It’s still in beta, so this means there are still some kinks to work out, but it’s the first site that combines the power of a meta-aggregator with the power of multiple social networks simultaneously. Not just a LinkedIn or Facebook app, it can utilize your LinkedIn, Facebook, and Plaxo social networks simultaneously to tell you who in your network might be able to help you with a job on all of the major job search sites. And, unlike most job sites that just do simple title search, it uses Natural Language Processing and Semantic Search to find other jobs that might be relevant to you. For example, if you searched for “inside sales” you would not find an “account executive” job at Oracle on other job sites, which is almost the exact same job, just titled differently in a different organization. And if you searched for Procurement, you might not find Supply Manager — but the Jackalope Jobs engine will. Of course, since NLP and Semantic technology are not perfect and still in refinement, not every result will be a 100% match**, but the majority of the results will be very appropriate matches and this approach furthers the the goal of the site which is to expose you to more opportunities that you might be qualified for and able to get as a result of your network than other job sites give you. And if you search different, you might get surprising results. Sudy’s next post will describe how you use the platform to search different.

 

* Full disclaimer: the doctor is currently serving as CTO of JackalopeJobs and has a vested interest in the site’s success.

 

* For example, the phrase “human resources” causes the platform no end of grief because not only does almost every job description mention it once (which is easy to filter out), but poorly written job descriptions mention the phrase more than once when the job is not a human resources (related) job, which leads the NLP keyword analyzer and/or semantic engine to sometimes believe the job might actually be related to human resources. So this search will often turn up more false positives than others. However, these jobs typically get weighted down as you will not likely have as many, or any, connections to jobs in a different industry if you are a HR professional.

Take the First Step on Your Next Level Supply Management Journey

And start by downloading the new BravoSolution sponsored Sourcing Innovation WhitePaper on “Taking the First Step on Your Next Supply Management Journey” [registration required] today!

Lamenting that the acronyms and acclamations are flying fast and furious in the Supply Management space, with phrases like VFS. Hi-Def Sourcing. Next Level Supply Management. Next Practices. leading the way, this paper, which notes that even world class Supply Management organizations have to do something more to maintain their year-over-year contributions to the bottom line with the perfect Procurement storm of high demand, low supply, and high market volatility brewing off of the coast, provides a roadmap for those Supply Management organizations that are looking to begin, or continue, a Next Level Supply Management Journey.

For an average organization, this will be a long journey that could take the better part of a decade. There’s a reason that only 8% of the Procurement organizations make the best-in-class cut (defined as being in the top quartile of both efficiency and effectiveness) in the Hackett Group rankings (which benchmark 73% of the Fortune 100). It’s tough to be the best. (But not out of reach for the dedicated. That’s why the rankings change year over year.)

In order to help a Supply Management organization begin its Next Level journey, this paper starts by defining a 3-Level Maturity Model across nine axes that can be easily understood by any Supply Management organization. While you can argue for 5 (and follow the Hackett Model), or even 7 (and follow a pyramidal model), by breaking the model down at the borders, the reality for most organizations is that they are either are best in class, better than average, or worse than average, and until they are deep in a journey, any classification that is more fine-grained just confuses the issue.

The nine axes are:

  • Sourcing Process
  • Organization
  • Finance
  • IT
  • Product Management & Marketing
  • Risk Management
  • Asset Management
  • Relationships
  • Metrics

And depending on where you fall on the majority of these metrics, this will slot you either into a

  1. st level organization still in the standardization and complexity reduction stage, a
  2. nd level organization in the operational excellence stage of Supply Management, or a
  3. rd level best-in-class organization that has progressed to the head of the pack with its mastery of strategic business enablement.

To find out where you fall, and get some good ideas on how you get there, download the BravoSolution sponsored Sourcing Innovation white-paper on “Taking the First Step on Your Next Supply Management Journey” [registration required] today!

the doctor’s Top 10 Cities for Supply Management Centres of Excellence (Where Should Your Supply Management Organization Be Located? Part V)

Yesterday, I gave you the top 10 mega-regions in which to locate your Supply Management Centre of Excellence, and indicated the major cities in each region that should top your list. For those of you keeping count, I listed 46 cities. If you’re indecisive, that’s a lot of cities to choose from! So, today, I am going to give you the doctor‘s top 10 cites for your Supply Management Centre of Excellence and his rationale!

Rank City Mega-Region Rationale
10 Dallas The Dallas Triangle The telco corridor. Oil and gas USA. Just a few hours north of Silicon Hills. Finance. More Fortune 500 headquarters than any other city in the USA. The centre-point of the largest metropolitan area in the south and the fourth-largest metropolitan area in the USA. East-West and North-South focal point of the interstate highway system — get anything, anywhere, anytime. One of the largest, and busiest, airports in the world (so you won’t miss Chicago). Sports, sports, and more sports. The world famous Dallas Cowboy Cheerleaders. People named JR. A great education system. Birthplace of Amy Acker, who, before taking the Whedonverse by storm, made sure that those of us who were adults with young children didn’t get the short end of the Wishbone.
9 Frankfurt The Frankfurt-Gärtringen Corridor The stock exchange, renewable energy, great transportation and telecommunications infrastructure, and German engineering! And let’s not forget Frankfurther Rindswurst. Woot! Woot!
8 Rio de Janeiro The Rio de Janeiro to Sao Paulo corridor It’s not the CRIB, it’s the BRIC, and it starts with Brazil. It’s the emerging South American powerhouse, which is the most visited city in the southern hemisphere (and home to Carnival), on the coast, and surrounded by a great transportation infrastructure. It is the headquarters of many state-owned companies, the centre of the oil and gas industry in Brazil, and the second largest industrial producer in the country. Foxconn, who produces all of Apple’s iPads and iPhones is down the corridor in Sao Paulo, so you know that Brazil, and Rio de Janeiro, is here to stay as a major player in global trade.
7 Paris Greater Paris La ville des lumières. La ville de l’amour. La vie en rose. Audrey Tautou. La mode, l’architecture, et la philosophie. Quoi d’autre avez-vous besoin?
6 Seoul Greater Seoul A megacity with a population over 10 Million, it is the largest city proper in the OECD developed world, that is home to major multinational conglomerates and one of the world’s top ten financial and commercial centres. A very technologically advanced infrastructure and an openness to the Western Way of doing business. Architecture, fashion, and culture extrude from every crevice. And it’s home to the Wonder Girls of K-Pop. How can you go wrong?
5 Amsterdam Amsterdam – Brussels – Antwerp Central European location, an almost universal understanding of English, great international relations, strong fashion and tourism industries, architecture, and culture (even excluding its world famous Red Light District). Plus, lots and lots of conventions — no travelling required!
4 London London – Leeds – Chester More visits from The Doctor than any other place on earth (and the most likely city to be the first to participate in intergalactic trade). On a more current note, the LSE, the fashion scene and haberdashery shops, and the entertainment industry draw all shapes and sorts of creative talent. Plus, it gave us The Clash and Generation X. What more can you ask for?
3 Tokyo Greater Tokyo Domo arigato gozaimashita! You have to interact with a lot of people everyday. And not all of these people are polite. Why not go somewhere politeness reigns? Plus, it’s the home of Sanrio (hello kitty) and the J-Pop explosion. How can you go wrong? (Oh, and the financial clout, hi-tech infrastructure, and the wide range of cultural pursuits from ikebana and origami to shopping and whiskey, doesn’t hurt either.) And if that’s not enough, anime, manga, and gaming central! (If you think Gibson is inspired, just wait until you read Masamune Shirow!)
2 New York Boston – New York – Washington Corridor If you’re gonna be in Supply Management for the long haul, you gotta have Heart. And since New York is The Heart of Rock & Roll, it’s as good a place as any to start. Plus, the easy access to capital doesn’t hurt!
1 Los Angeles The California Coast Despite our desire to move to a paperless office, we still have to deal with a mountain of paper every day. Purchase Orders, Goods Receipts, Invoices, Import Forms, Export Forms, RFXs, etc. etc. So why not base your Supply Management organization in the home city of Wil Wheaton, the guy who made collating paper cool!