Category Archives: Procurement Damnation

Simply Your Procurement Life and Eliminate the 5 E-procurement Mistakes You Don’t Realize You’re Making

Today’s guest post is from Iyana Lester, a Project Analyst at Source One Management Services who specializes in contract management and negotiation, project evaluation and monitoring, and market assessments.

Along with the boom of internet-based business came the challenges of maintaining an effective supply chain in the digital space. E-procurement offers a seamless solution to streamline processes and improve compliance all while reducing cost. While e-procurement has been around for several years, there still remains several factors that impede businesses from utilizing it fully and attaining maximum savings largely based on their expectations.

A recent Procurement Insights article points out that merely assuring yourself you’re doing everything in your power to maintain supplier relationships isn’t enough. “Even if you are well-versed in procurement and can speak every language in existence, nurturing complex supplier relationships in a global spectrum requires frequent communication that often slips without a system to manage the contact.” So what does this mean for organizations considering the shift?

Inform yourself of what’s out there before committing to one e-Procurement solution. More importantly, become educated on the user short-fallings that lead people to assume that their solutions aren’t optimal. This will allow the largest-scale view of your options without any user-impairment bias. By ensuring your expectations are reasonable, you’re conveniently building yourself a ladder out of a situation coined by Sourcing Innovation as Procurement Damnation. Whether you prefer it as a remix to AC/DC’s Rock ‘n’ Roll Damnation or a procurement state of agitation, you can’t anticipate unrealistic savings and results from an e-Sourcing platform. These solutions are helpful in approaching the challenges of global sourcing, but they are only 100% effective with a strategy that supports them.

Below is a list of several of the most common shortcomings faced in e-procurement. As you develop your e-Sourcing options, keep these organizational glitches in mind:

1. Poorly Implemented Systems

This issue stems from a lack of initial planning. The systems must be integrated with existing corporate systems so that they will be interacting all the way to the end user’s interface experience. They should also be implemented quickly to accomadate any rapidly-developed new technological advancement. Failure to consider any of these focuses can result in systems that aid in one area of the procurement process but cause harmful disruption in others.

2. Partial Implementation

When implementing any large scale change, the change must be adopted and interconnected organization-wide to achieve optimal outcomes. To successfully implement e-procurement, your organization needs to carry out a detailed evaluation of its procurement processes and consider the needs for each division. Roles will continue to depend on effective collaboration between many different organizational players. This will assist in preparing proper agendas and budgets.

3. Uninformed to the Latest Technological Advancements

Monitoring advancements in e-procurement technology will serve as a guide for key risk concerns that should be in your organization’s radar. Observing technological advancements will lessen the chance of your systems becoming outdated.

4. Failure to Develop Performance Metrics

Many organizations have the mentality that once a system is in place, all advantages and will be manually achieved. Considering a comprehensive set of metrics provides a better framework for benchmarking and allows for the procurement process to be more effectively managed. Some metrics areas to consider may include effectiveness, efficiency, quality, and cycle time.

5. Unsuccessfully Identifying the Issues at Hand

A system cannot effectively solve a problem unless the true problem is identified. Organizations often identify sources and causes of the problem and look for fixes that will only temporarily improve the issue. To capture the full potential of your e-Sourcing, never close your eyes to developments and minimize your exposure to Procurement Damnation by following the above steps. The most effective procurement management systems are constantly adapting their capabilities while remaining user-friendly and consistent. Procurement departments should be mindful and eager to pursue new functionalities wherever possible without compromising supplier data quality.

Thanks, Iyana.

We’re on a “Highway to Hell”

A Procurement Damnation Interlude

Livin’ easy
Spendin’ free
Season ticket on a one way ride
Askin’ nothin’
Leave them be
Takin’ everythin’ in their stride
Don’t need reason
Don’t need rhyme
Ain’t nothin’ that they’d rather do
Goin’ down
Party time
Their friends are gonna be there too

We’re on the highway to hell
On the highway to hell
Highway to hell
I’m on the highway to hell

No stop signs
Speed limit
Nobody ever slowed ’em down
Like a wheel
Gonna spin it
Nobody ever messed ’em around
Hey Satan
Payin’ my dues
Playin’ in Procurement’s band
Hey mumma
Look at me
I’m on the way to the promised land

We’re on the highway to hell
Highway to hell
I’m on the highway to hell
Highway to hell
Don’t stop me

I’m on the highway to hell
On the highway to hell
Highway to hell
I’m on the highway to hell
(highway to hell) I’m on the highway to hell
(highway to hell) highway to hell
(highway to hell) highway to hell
(highway to hell)
And I’m goin’ down
All the way
I’m on the highway to hell

Just like AC/DC.

 

Provider Damnation #69: 3PL Firms

Today we tackle our first provider damnation — Third Party Logistic (3PL) firms. These firms, or providers, provide logistics services for part or all of the organization’s supply chain management functions. Unlike trucking companies, ocean cargo companies, or air freight companies which simply manage trucks, ships, and aeroplanes, 3PL firms specialize in integrated operations and manage both multi-modal transportation (where the goods are trucked from the plant to the dock, shipped on a cargo carrier to a foreign port, loaded onto a truck for the local warehouse, and then loaded on another truck to the local airport when expedited air freight is needed) and warehousing on behalf of the client (that might need goods from multiple suppliers simultaneously cross-docked and shipped to local warehouses and storefronts across the country from a central warehouse).

For many under-staffed, under-supported, and under-platformed logistics departments, 3PLs are a blessing because, without enough staff to analyze options or modern technology platforms to crunch the numbers, 3PLs offer the organization an instant cost savings, a substantial time savings (because they do all the work), flexibility (as they can adapt to new regions and new demands quickly), and focus (allowing the logistics department to just worry about the warehouse and local distribution / shelf restocking).

These advantages are there for a reason, to cloud the disadvantages that 3PLs also bring — because they are a true double edged sword that, depending on the angle you see it from, shines as bright as the sun or drowns you in the darkest night of the abyss.

In exchange for cost savings obtained by the 3PL, the organization gets IT headaches. In exchange for flexibility, the organization gets a loss of visibility. And in exchange for focus, the organization gets a complete loss of control.

The 3PL is going to use their own TMS (Transportation Management System) to manage your organization’s freight, and this is going to contain the data your organization needs to complete import/export and global trade documents, the data Finance needs to confirm the invoices, the data Accounts Payable needs to match the goods receipts to the invoices, and the data Sourcing/Procurement needs to analyze the total spend. And if you think they are going to have an out-of-the-box import into any of your systems, think again. Unless you use one of the three systems they decided to support, it is CSV or XML dump and good luck Mr. and Mrs. Client.

The 3PL is going to manage the carriers it uses, the lanes they take, the cross-docks they use, and so on. Your visibility, especially if you don’t have a tight integration, might be limited to ship date, status, expected delivery date. Not very good in today’s world where you might need to know where that critical shipment is at all times.

Finally, the 3PL is going to contract the carriers it uses, and if they suck, well, too bad for you until the contract is up. You might get a carrier that, instead of showing up an hour after your warehouse loading dock opens, as per the contract, consistently shows up an hour before it closes that uses refrigerated trucks that only cool to 5C above mandated transport temperature and that occasionally “forgets” to lock the back leading to inventory regularly going missing, resulting in a lot of claims to the 3PL and/or your insurance company. Remember, if you give the 3PL the authority to negotiate contracts on your behalf which can’t be terminated until the carrier is insolvent, your organization is, simply put, screwed.

Consumer Damnation #71: Government

In today’s post we’re taking on the first of the consumer damnations — the government. Everyone wants them as a customer because, as the saying goes, once you’re in, you’re in and it’s impossible to get thrown out unless you do something really, really egregious because the process to replace you is so long, arduous, and painstaking that no one wants to do it, especially since management will likely change half-way through the process anyway and put all projects on hold until a new assessment is done. Salesmen love government contracts because they can sell once and then sit back and rake in their commission year-after-year as the evergreen renewals keep coming in.

But, as a Procurement professional, you don’t have it so rosy. Not only can government customers be very demanding, and require you to work extensively with Engineering, Manufacturing, IT, and the Supply Chain to design custom solutions to meet their needs, but they can be quick to pass on the blame to your company even if it’s not your fault. (You didn’t specifically say that we couldn’t put low-grade transparencies with a low melting point through this high-output, high-temperature laser printer that specifically said only 50 lb or better paper stock in the trays.) And if they get caught knowingly outsourcing to China, when they preach “Buy American”, they’re going to blame you and redirect the public outcry your way even though they told you “lowest cost, American or not”. And if it comes to pass that there was child labour or unsafe working conditions two tiers down in your supply chain that you didn’t know about because your supplier used unapproved raw material suppliers, they’ll be the first to throw you under the bus, the plane, and the cargo ship they threaten to use to ship what’s left of your corpse back to China when they are done with you.

Plus, now many government agencies mandate that you provide bill of material data, shipping manifests, country of origin determinations, quality inspections, and other information with every product that you provide the government so they can meet their accountability mandates. It used to be you just shipped the product. Now you have to ship the product and, in some cases, a literal CD’s worth of information — even though they don’t need 90% of it to fulfill their mandates and answer the questions they need to answer. (Your organization needs all of it to maintain import / export / product / regulatory / security compliance across the supply chain, but most parties you sell to only need a small subset of that data.)

And if that’s not enough, if the government runs out of budget and can’t get agreement to run a deficit, there can be an indefinite spending freeze while the situation is resolved. And, unlike the private sector where you have the right to suspend delivery of goods and services until payment resumes, if your organization is providing goods considered necessary for essential services, your organization can be (legally) ordered to continue providing those goods and services during the spending freeze (as your organization will be paid when the freeze is over as a provider of essential goods and services). If the spending freeze drags on for months, this can put your organization in dire financial straits, and additional stress to reduce costs below the baseline established during the sourcing phase will be put on Procurement.

Governments can be your organization’s best and worst customer and Supply Management’s biggest point of leverage and largest risk (as the volumes required can often allow the organization to negotiate great deals but the reputational and legal liability as a result of a single mis-step in the supply chain can be exceedingly costly).

However, in this rather stagnant economy, for many companies, it’s a damned if you do (get Government as a customer) and damned if you don’t (have Government as a customer). Have fun!

Technological Damnation 81: Social Media

While there may be a dirty dozen of risk categories that we need to address in order to adequately address the Procurement Damnation we have willingly placed ourselves in as we try to collectively forge a new frontier, the largest category of risk that we need to address is that of Technology. Almost one fifth of all damnations that plague us fall into the technology category. Mobility, e-Currency, and Social Media are just the tip of the technology iceberg.

However, social media might be the most damning of all. Besides the obvious facts that we collectively as a society waste enough time on a single video to double the size of Wikipedia (Source), that social media is literally making us stupid (Source), and that every marketer and their dog is doing their best to convince you that your company has to be on every social network in existence (including the dozen that are literally here today and gone tomorrow as Facebook and Twitter have pretty much won the social media war in the English speaking world for the time being), there is the simple fact that social media takes more than it gives.

Social Media is called social media for a reason. It was designed for people to be social with each other, not for businesses to sell wares to consumers, certainly not for businesses to sell goods to each other, and definitely not for businesses to conduct important, strategic, operations. But yet you are constantly bombarded with requests from marketing for information about your supply chain efficiency, corporate social responsibility, sustainability, or other operations and practices that can be used to boost corporate image, brand reputation, or product differentiation on these outlets. You’re working hard to define and implement proper category management techniques on dozens of strategic and high-value categories but all marketing cares about is which supplier will get the organization the most free press, whether the “in vogue” corporate social responsibility practice of the day is getting enough attention, or if the new product being sourced will have enough bell-and-whistle features to allow for one dozen unique messages for each social media channel of interest. Is it insane or is it inane? Or is it both?

And then, to make matters worse, rather than use your supplier portal, your suppliers want to message you on the social network they are signed into 24/7, your partners are checking the never updated Facebook company page instead of the official contact directory, and eliminated vendors keep messaging your organization’s Facebook and Twitter accounts asking marketing why they are no longer being considered, rather than read the detailed explanation in the vendor management portal you provided them.

Where Procurement is concerned, social media is a menace that puts poor old Dennis to shame. And now even the “don’t be evil” Google, as per yesterday’s post on who wins and loses in the Twitter/Google deal, is going to index the biggest trove of inanity that exists on the internet. When will the chaos cease?