Category Archives: rants

It is NOT Direct or Indirect — It is Strategic and Complexity!

Now that we’ve set the record straight on sourcing, it’s not a suite, it’s just sourcing; and optimization, it’s not optimization, it’s strategic sourcing; it’s time to set the record straight on another rampant misconception perpetuated by vendors who make their living off of the ignorance they perpetuate.

It is not direct or indirect — it is strategy and complexity.

The right way to source a category has absolutely nothing to do with whether it is a direct category for your organization or an indirect category for your business. Nor does it have anything to do with whether or not it is a category regularly sourced by your GPO or whether or not the GPO has it under contract.

First of all, as we elucidated in our most recent paper on “Complex Sourcing: Are You Ready”, even the categories that were traditionally seen as the simplest indirect categories are sometimes actually among the most complex “direct” categories that the organization possesses!

Secondly, what is indirect for your organization is direct for another organization, and a supplier in particular. Calling it indirect only masks the fact that, at some point in the supply chain it is a complex direct category and if your supplier, or GPO, is not approaching it correctly, a significant amount of money is being left on the table.

While there are some that would very much like to forget that before the introduction of e-Negotiation (e-RFx and e-Auctions), a number of “indirect” categories used to cost organizations millions — such as tires in automotive, lights in aviation and printer ink in back offices everywhere — this is not the right thing to do. We have to remember that these organizations never understood how much these “secondary” categories were really costing them and that, sometimes, 100% profit margins were the norm, because they often did not have the ability to go out to market like we do today.

Thirdly, while a product organization might see services as indirect as such a category would be labelled as non-core, and, similarly, while a service (or financial) organization might see a product category as indirect as it too would be labelled non-core, if such service, or product, is essential for the organization to deliver the product, or services, the organization profits on to the end consumer, how can such a service, or product, really be non-core?

For example, if successfully selling that next generation cellphone requires augmenting the supplier’s design team with a new design team that can enhance usability above the competitor’s product without sacrificing a low-price point or quality, that is a critical service and should not be treated as a secondary outsourced indirect category. Similarly, if delivery of your big data analytics services requires a specific high-end laptop configuration that can not be easily met by all providers, and a sub-par configuration would result in delays or service degradations, this is not a category that can be thrown over the wall to a GPO either.

In other words, direct or indirect has no correlation to the complexity of a category or its strategic importance to the business and, thus, should not be used to determine the appropriate sourcing strategy. The right way to initially classify a category is to use a basic measure that that captures its strategic importance and its complexity and any category with a measure that exceeds a certain threshold must be strategically sourced. The rest can be sourced using simple spot-buys or other traditional methods provided that they are not too complex, or too strategic in someone’s view, for these traditional methods.

There is no ONE platform!

As much as we would like to realize the dream of one platform for Supply Management, it’s not going to happen — at least not within our professional lifetime. The internet, and software development, might be moving in cat years, but let’s face it, it’s been 90 cat years since true first generation strategic sourcing, e-Procurement, and other fledgling Supply Management products hit the scene and we still don’t have a single end-to-end strategic source to pay platform! (Yes, there are source-to-pay platforms, and some are rather good, but there is not one that is not missing some key piece of functionality for strategic sourcing, such as optimization or advanced analytics, or for e-Procurement, such as e-Invoicing and automated m-way match.)

But what can we expect, with the exception of a handful of organizations (that can be counted on your fingers, minus your thumbs), we haven’t even reached the era of one ERP. Larry had a dream, but outside of Oracle, I believe the number of global organizations that successfully migrated their international operations to one global (Oracle) ERP instance is 5 (and that’s why the vision of one platform went away and Oracle acquired so many other leading ERP platforms, leaving only its rival SAP standing at the end of the day once the acquisitions on both side are tallied up.)

We have the situation that no one vendor, and this includes SAP, Oracle, and IBM even after their string of acquisitions over the last 90 cat years, has a platform that fully addresses basic Sourcing, Procurement, and Logistics, and once you start factoring in CLM, SRM, Sustainability, Talent Management, and Innovation Management needs, nothing comes close, or will come close, for at least another 60 cat years at the current development pace. In addition, with the constant pace of innovation in terms of process, and the constant shift both towards globalization and specialization, nothing may ever come close.

Sauron may have forged the one ring, but not even the almighty Google will forge the one platform. So you have to stop focussing on finding the right vendor and shift to finding the right platforms to serve your Supply Management needs. To do this, you have to first ask, what is the workflow?

Even though the organization may have different processes and procedures for T&E, P-Card, indirect, and direct purchases, depending on category, department, amount, and budget owner, there is still one (mega) process that is followed.

There will be a needs identification followed by an identification of whether or not an inventory, contract or preferred vendor exists to fill that needed followed by a determination of whether an event is needed or not, followed by the determination if a requisition is needed, followed by an order (which may or may not require a purchase order) followed by goods delivery and an invoice, followed by acknowledgement and inventory, followed by determination of an approval process, followed by an approval process for the invoice, followed by a payment, followed by data capture and archival in the right systems. There is a mega-flowchart that defines the mega-workflow that is defined by everything the organization needs to directly and indirectly support the process that defines system needs and integration needs.

The answer is to identify one or more minimal set of overlapping platforms that fulfill the workflow needs, integrate with the underlying ERP and / or (Master) Data Management (MDM) systems, and, directly or indirectly (through the underlying systems) integrate with each other. Once these system sets are identified, one works with the vendors that best meet the organization’s overall needs and implement the systems that accomplish the workflow. That’s how progress is made. Nothing is gained by seeking out the one platform. It is a myth, and a myth that destroys organizational progress and productivity.

There’s No Return on Customization.

the doctor does not attend many events, but hen he does one thing he regularly hears is Company B saying that there is no platform that meets there needs so they are buying Solution S from Company X and customizing it through the vendor or a third party.

Before one more organization does this, the doctor needs to scream DON’T! In this day of age there is no return on enterprise software customization … no matter what the vendor or 3rd party may tell you.

Why?

1) Time to Delivery

If the functionality is truly valuable, by the time it is delivered, another vendor is sure to have equivalent functionality on the market ready and waiting for your implementation.

2) Up Front Cost

Custom development is a huge cost — which may never be realized given the average IT project failure rate and the average return.

3) Maintenance Cost

Out of the box functionality is covered under standard warranty and standard maintenance agreements — custom modifications usually require high hourly rates to contract scarce development talent for as long as is needed to fix any bugs or do any required upgrades.

4) Delayed Upgrades

While everyone else gets upgrades and new, free, features on the provider’s schedule, you get to wait and wait and wait until the talent has the time to address, and complete, the necessary upgrades to the custom modifications you made to allow the base system to be upgraded — this can be months (or years) and efficiency losses will add up on a daily basis!

When you put it all together, the costs will typically outweigh the benefits. So put the effort in to finding the right vendor with the right system and when it comes to customization, just do NOT do it! The only company that profits off of customizations is the vendor doing the customizations, because they are the company at the bottom of the money pit while their clients keep shovelling the money in.

LOLCAT Says – Canada, Do NOT Vote Conservative!

LOLCat, the election is coming up on October 19 (2015) and Harperman, the same individual whose party is effectively holding cancer sufferers, survivors, and their affected kin hostage by not matching up to $35 Million of donations unless the party is re-elected (Source: CBC News), wants to be re-elected.

What do you think, LOLCat. Should Canadians vote Conservative and, by definition, put the Harperman back in office? (Remembering that politics in this country does not work like politics in the United States. Whomever leads the party that gets the most seats gets to be Prime Minister, even if he [or she] is not elected in her riding!)

Before you answer, let me remind you that the Harperman is the same individual who:

  • forced Canada into the TPP negotiations
  • withdrew us from the Kyoto Protocol (making us the first developed country in the world to withdraw from this planet saving protocol)
  • cut funding to Veterans Affairs to the point that a Veterans Group has launched an Anyone But Conservatives campaign, Green Party included! (Source: Huffington Post: “veterans launch anyone but conservatives campaign during harper stop”)
  • … and then spent over $700,000 fighting a class-action lawsuit fighting wounded Afghan veterans who just wanted the benefits and care they were promised (Source: Huffington Post: “veterans lawsuit canada harper government”)
  • runs Billion dollar deficits while cutting social programs (Source: They Tyee)
  • introduced controversial bill C-51, which, according to the OSCE, violates Universal Principles of Human Rights and gives CSIS unprecedented new powers to spy on individual Canadians and revoke terrorist propaganda (Source: National Post)
  • put our safety in jeopardy every time we leave the house by slashing funding across all safety programs at Transport Canada (Source: Global News)
  • pushed First Nations to give up the rights to their land for oil and gas, land that took them decades upon decades to reclaim (Source: The Guardian)
  • spent over 1.3 Million fighting sick moms’ EI disability benefits, wait, what?!? (Source: The Globe and Mail)
  • made a secret arms deal with Saudi Arabia (Source: The Globe and Mail)
  • and who is, in leading Canadian minds, gasp!, pro-war (Source: Globe and Mail)
    and who apparently loves the smell of napalm in the morning
    (how anti-Canadian can you get? There’s a reason we’ve went from being one of the best respected countries in the world to a country that is literally spit on!)

And who has committed more sins than we can document in a single post, but which have been chronicled and made freely available by CUSP (Citizens United for a Sustainable Planet) on The Harper Sin List* page.

What say you, LOLCat?

We agree, LOLCat, we agree. Harper has singlehandedly ignored Canadian ways while destroying our reputation and our cultural heritage.

In the words of Tony Turner:

Harperman, it’s time for you to go!

We’ve had enough of your not-so-benign dictatorship!

There’s a reason the Canadian Christians think “Harper’s clock is in Jesus’ office” (mwpr.ca).

Influential Damnation 98: Pundits / Futurists

Pundits and Futurists, who are one in the same, are the third influential damnation we are discussing, having already addressed consortiums and conferences. In order to see how these individuals are one in the same, we’ll start by reviewing standard definitions.

A pundit is defined as a person who offers to mass media their opinion or commentary on a particular subject area on which they appear to be knowledgeable.

A futurist is defined as a person who regularly makes predictions about the future, which is precisely what a pundit typically does when they offer their opinion and commentary to mass media!

Why are these individuals a damnation?

First of all, as clearly explained in Sourcing Innovation’s recent series on The “Future” of Procurement: What’s Old is Still Old! and An Expose of Procurement “Future” Trends: Digging Deep to Reveal the Truth, most of what those bloody futurists are proclaiming as the grand future of Procurement is old news, ongoing blues, or remanufactured shoes. Most of what they have been preaching from the worn out pulpit the last few years is the exact same message that their futurist predecessor were preaching one or more decades (or even centuries) ago!

Secondly, like the purveyors of apps, mobile, big data, and cloud, most of their messages are based in fear. If you don’t prepare for this today, you will go out of business tomorrow. If you don’t get this platform today, you will be relegated to the third world tomorrow. If you don’t jump on this process today, you will bleed red tomorrow.

Thirdly, when they get tired of preaching their tired old messages, they jump on the first vendor that gets a bad rap in the gossip chain as a result of an implementation that didn’t go perfectly, typically before figuring out why and who is really to blame. While it’s usually the case that the vendor didn’t do as good of a job managing the project as they should have done, it’s often the case that the customer didn’t heed the advice of the vendor and tried to rush ahead or do something themselves that was difficult without getting proper training and guidance. Enterprise technology, and especially enterprise technology that relies on a lot of integrations, data, advanced analytics, or sophisticated models, is always more involved and difficult to implement, integrate, and configure than you think it is and trying to do it yourself without an understanding of the nuances and gotchas is just asking for trouble. And while it is true that some vendors charge a lot for this service, it was the customer’s choice to select that vendor in the first place so the blame typically rests as much on the customer as on the vendor. And a pundit that just jumps all over the vendor without getting a full picture of what went wrong and how it could have been prevented doesn’t help anyone. We need to identify failings, their root causes, and solutions so that everyone can learn and move forward. Not encourage Perez Hiltons’ to invade our space.

Anyway, they’re a damnation and that’s why if the doctor is anything, he’s an anti-futurist.