Category Archives: Public Sector

From the Land of D’OH: Timely Payments Make Effective Business

A recent SupplyManagement.com article on how “Direct Payments Will Save Government £40 Million a Year” caught my eye not because improving efficiency in an organization that spends Hundreds of Millions processing paper will, obviously, save Millions, but because of this paragraph:

The government estimates that ensuring SMEs get paid more promptly will enable them to run their businesses more cost-effectively and pass those savings back to the government. It will also improve the cash flow of small businesses and their ability to plan for future deals.

Supply Chain experts and leaders have been preaching this for years. Slow payments force suppliers to take loans, at terms that are significantly worse than what a large buying organization can get. Sometimes, to make payroll and secure cash-flow when buyers take 60, 90, and even 120 days to pay, small/new/perceived-risk supplier organizations have to borrow at 20%, 30%, and even 40% per annum. This substantially drives up their cost of doing business — a cost that will, inevitably, be passed to the buyer with the short-term mindset. If the buying organization pays on time, or, if it needs to, takes out a loan based on its credit terms, which could be only 6%, 5%, or 4%, to pay on time, the supplier can operate more cost effectively and pass on those savings to the buyer. It is that simple.

But this is a government organization. We should be happy they figured it out before Mayan Doomsday and not The Date Heard Around the World [www.isaac-newton.org]. (At least this way some of us will see the beginnings of a government organization coming to its senses during our lifetime.)

Of course, if the UK government really wants savings, it should mandate that the NHS follow this advice. As the world’s fifth largest employer [digg.com], it spends £110 Billion a year and processes Millions of payments. That’s a huge savings opportunity!

Where’s Our McClelland Report?

Given the combination of expenditure levels, complexity, vulnerability and criticality to operations, it should be expected that extremely high priority be given to procurement by the most senior levels of management and others responsible for governance within public sector undertakings.


In addition, it is obvious that those involved in the day-to-day conduct of procurement operations have an important and highly professional role to perform. The procurement function and its organisation should be regarded as one of the most important in the undertaking and its status should rank with that of other professional functions such as finance. Indeed, given its dynamism, variability and external perspective, not only should those involved have the backing of professional training and accreditation they should preferably have interpersonal skills which support their externally facing roles as the delegated legal and commercial representatives of their organisations as they place business with suppliers. Also, there is a growing requirement for knowledge of and ability to satisfy legal and other corporate and social responsibilities such as sustainability.


I believe that one of the keys to progress is the definition and pursuit of a vision of the ideal model for procurement including its optimum characteristics.

Truer words, as penned by John F. McClelland in his 2006 Review of Public Procurement in Scotland (known as the McClelland Report), could not be said.

But what I can’t understand, is how these words, spoken for over a decade, by Procurement visionaries, were taken as inspirational by the Scottish people and turned into the success story recounted in the recent CPO Agenda Executive Debate. As per Cuts from the Centre,
which documents the success of the Public Procurement Reform Board ( PPRB ) in Scotland (which is centralizing Procurement in the Public Sector), which was formed in recognition of the importance of procurement by the administration in response to the McClelland Report, In the first two years of the programme, as independently reported by Audit Scotland, there was £327 million attributed to the program itself, and there were further efficiency savings, in
terms of the way we would understand efficiencies, reported through efficient government returns of about £200 million. Given that public sector spending on goods and services across Scotland amounts to about £9 Billion, that’s a saving of over 5%, which isn’t bad at all for a new program in the private sector (which is getting compliance of almost 90% without a mandate).

The public procurement world needs more success stories like this. How do we get them?

Public Procurement in 2020 — Are You On Track? Part V

At the beginning of the week, we began our discussion of Hansen’s predictions for public procurement in 2020, which were offered as a 5-part series last month in response to the 5 predictions of Bob Lohfeld (of Lohfeld Consulting) that were published in Washington Technology in early July. We started with a discussion of the Government Market and then moved onto discussions of Workforce, Process, and Technology. Today, we tackle the final predictions on Transportation.

In his piece, Lohfeld prognosticated that:

  1. While computing will be ubiquitous, we will still be plagued with transportation problems.
  2. Traffic will become so congested around major cities that employers will always offer alternative work schedules and telework options.
  3. The Washington Beltway will regularly come to a standstill and no longer be considered a reliable transportation corridor. The Tysons Corner area will be in its eighth year of modernizing, and Maryland will be in its 40th year of studying the environmental impact of building an outer beltway. The Silver Line will finally reach Dulles Airport.

Well, duhhhh! He might as well have said that the sky is blue, grass is green, and roses are often red. His prognostications are so obvious that I can’t believe he would label them as predictions, nine years out!

What did Hansen have to say? This time, having the same complaints with transportation, he overlooked the obviousness of Lohfeld’s prognostications and simply noted that transportation, especially within the context of an increasingly global supply network is a linchpin component of an overall logistics and supply chain strategy. It is in essence the glue that holds the interconnecting elements of the end-to-end process from raw material extraction to manufacturing and through to distribution and, as a result, cannot be overlooked in any piece that looks into the future of Supply Management.

All I have to say is that logistics are always going to be an issue. First of all, not only is there not enough logistics infrastructure in many parts of the world, but the rate of new construction is not keeping up with demand — which is expected to increase substantially in line with global population increases and rising automotive sales in emerging marketplaces. Secondly, there are projections of significant talent shortages in logistics in the coming years as the baby boomers retire. Thirdly, global trade is going to continue to increase. Everything points to logistics challenges for at least the coming decade, if not longer. And we’ve all witnessed the increasingly slow pace of infrastructure development in North America in recent years. Prepare for the unending challenge.

Public Procurement in 2020 — Are You On Track? Part IV

At the beginning of the week, we began our discussion of Hansen’s predictions for public procurement in 2020, which were offered as a 5-part series last month in response to the 5 predictions of Bob Lohfeld (of Lohfeld Consulting) that were published in Washington Technology in early July. We started with a discussion of the Government Market and then moved onto discussions of Workforce and Process. Today, we tackle the Technology predictions.

In his piece, Lohfeld prognosticated that:

(1) Virtual businesses will avoid brick-and-mortar costs, reducing operations costs and increasing their competitive edge. (2) Mainstream companies will exist in virtual space with no physical offices. (3) Cloud computing will be accepted as the norm, IT security protection will be expected, and IT infrastructure will be designed for virtual workforces. (4) Both contractor and government workforces will telecommute, and geographic boundaries will diminish as virtual meetings replace trips to personal offices.

To this, Hansen quickly responded that once again, the above prognostication says a great deal without actually providing any meaningful insight or substance as it reflects broad generalizations without getting into the mechanics in terms of practical application.

SI has to agree. Why? Let’s review the prognostication sentence by sentence. Virtual businesses are already avoiding brick-and-mortar costs, just as they have been since the mid-nineties and the beginning of the e-Commerce and dot-com boom. Not only can we consider a number of virtual businesses as mainstream in the niches they serve, but many companies, especially in consulting and IT, have been aggressively moving towards virtualization since broadband penetration reached the point that real-time video conference was an affordable reality for a majority of their workforce. Even in our space, many of the office locations of your global solution providers are shared business centers or home offices of key personnel. Since one can define “cloud” any way one wants to, as no one knows what “cloud” really is, we can already say that “cloud” is the norm. Furthermore, IT security has been expected by anyone with any technical savvy for a decade and IT infrastructure has been designed for virtual workforces for the better part of the last decade. Finally, many government departments are already allowing their contractors who don’t interact with the public to telecommute, as this reduces their fixed overhead. With budget shortfalls expected to be the norm for the foreseeable future, and office space so expensive in ideal metropolitan locations, it’s obvious that the amount of telecommuting is going to increase and that most consulting organizations are going to strive to have all of their contractors work remote.

However, Hansen, who simply reprinted a post he wrote in 2007 on the emergence of the metaprise (that runs on a distributed synchronized supply chain platform that simultaneously links the unique operating attributes of all transactional stakeholders on a real-time basis), also failed to provide any useful insight. While the post did note that process and not technology is the driving force behind a successful e-procurement initiative, it was essentially a post on cost avoidance through advanced spend analysis (that included commodity-characteristic analyses) and the need for process and technology alignment to realize such cost avoidance.

the doctor has to say that he was disappointed with Hansen’s effort on this piece. While the doctor, who has been immersed in cutting edge technology on an almost daily basis since starting his Master’s research back in 1994, knows better than anyone the difficulty in predicting the technology landscape even three to five years out, he did expect a much better response to Lohfeld’s post and some solid predictions (or at least some more direct rebuttals). Unlike many bloggers and analysts in the space, who come from non-technical backgrounds and couldn’t cut a line of code if their life depended on it, Hansen actually has technology in his background and a pretty good understanding of what it can, and can’t do, as well as where it’s likely to go based on where it is now and where it’s been. And, more importantly, there’s no way he could have done any worse than Lohfeld!

So what will the Supply Chain technology landscape look like in 2020? Pretty much what it looks like today, actually. Until we see a quantum leap in computing (theory), it’s just going to be more of the same old, same old in a new package. The only difference is that it’s going to be faster and more powerful. Not only will optimization on even the largest global supply chain models be real-time (and power every real-time e-Negotiation with your supply base if the organization uses a leading platform from a leading provider), but analytics will be real-time across all organizational transactions. A couple of providers already have real-time optimization capability for models of moderate size (where changes are limited to price, volume, and “route” availability, for e.g.) and at least one provider has a spend analysis solution that allows an analyst to real-time drill on a spend cube of up to 10 Million transactions on a laptop. Expected improvements in bus speed, parallel processing, inline computation, and federation technology will soon allow real-time drilling on a spend cube of 1 Billion transactions. It’s only a matter of time before 1 Trillion transactions can be handled and data can be explored in real time. This will not only improve forecasting, but allow for a host of predictive analytics applications that can be used to update forecasts for global demand and market prices in real time.

Furthermore, as broadband penetration becomes almost universal and more modern standards are adopted for data interchange by supply management solution vendors, the metaprise will become a reality and end-to-end supply chain visibility will finally become a reality for the average Fortune 3000 company. However, what we won’t see are any entirely new applications or software capabilities that aren’t already being investigated. Since the tens are shaping up to be another decade without any quantum leaps in the computing world, and since the specialist enterprise space always lags the consumer space, which always lags fundamental research, even if a quantum leap is made in computing technology this decade, Supply Management still won’t see anything new for a while.