Category Archives: rants

Can We Fix Supply Chain Education?

For the most part, supply chain education is broken. Consider this quote from a recent ChainLink Research article on the “2011 Supply Chain Education Survey Findings” that was contributed by an anonymous respondent:

“Offered programs are parochial in nature, designed to drive sales of a vendor’s tools or services, or are too generic to be of value. For example, [a major prestigious university] doesn’t even understand its own legacy in systems thinking. Supply chains are complex and there are no easy fixes. Grossly simplified views perpetuate myths and drive the wrong solutions.”

From my vantage point, most of the educational options, as pointed out by this astute survey respondent, fall into:

  • Academic programs that are more outdated than bell-bottoms
    And if they are that recent, you’re lucky. Plus, most of the professors only have expertise in one or two areas, and it typically revolves around whatever technology or model they’re researching, or should I say, trying to push on the real world. And the gods forbid if you try to change the curriculum without full approval. Unless you’re a full professor with tenure, they’ll smite you down so hard that you’ll never crawl back up. (And by the time you’re a full professor with tenure, you’ve had all the life sucked out of you and don’t have any energy to make drastically sweeping changes for the better.)
  • Third-party programs from associations designed to please the lowest common denominator
    In these organizations, with boards and steering committees as large as the pool of high paying organization members, the motto is none of us is as dumb as all of us and it shines through in the program that is developed. Full of useful topics, but the content is so watered down it’s worse than a self-serve soda at a Kwik-E-Mart trying to save on syrup.
  • Private programs from companies set up by people that used to purchase (but don’t anymore)
    Unlike academic programs which at least have competing theories (but no guarantee that any will be right), these typically have one theory from the energetic individual who started it, and a big slant to whatever type of procurement or logistics management he or she was doing. If all he really did was buy office supplies and equipment, or manage 3PLs, you might as well take your check and give it to some massive charity organization like the United Way. At least 10% of the money will help someone.
  • Vendor programs from vendors that sell a service or solution
    These can actually be quite good, but the content will be carefully designed to insure that you can’t put anything into practice without a tool to support you, and, surprise surprise, it will be ten times harder to use a tool that isn’t the vendor’s.

Now, there are a few good courses out there, delivered by consulting firms who tailor them to client needs, but the consultants get big bucks for these courses, and then more money to identify the next need and design the next course, so it’s actually in their best interest to get it right. But, by the same token, it’s also in their best interest to keep the courses targeted, specialized, and not widely available.

The net effect is that, at the end of the day, the overall state of supply chain education is poor. And the question we need to ask is “can we fix it?”.

I’m not sure. I see a solution, but it would involve invalidating pretty much all of the current theories on higher education, angering large groups of people in the process, and going against the grain of modern western culture.

The answer lies in the past. Years and years (and years) ago, there was a time where only a few people went to College. Higher education was reserved for those who intended to make a career of the intellectual pursuits, and the rest of the population chose a vocation, went into the trades, and apprenticed under a master. The answer is that newbies need to be hands-on trained by professionals, using curriculums selected or designed by the organization as relevant. The masters nearing the end of their careers need to be relieved of some of their leadership and management responsibilities and refocussed on training the new generation who will be tasked with capturing their knowledge and updating the company curriculums as they learn.

These curriculums can be shared among a network of peers, who embrace a co-opetition model where they compete for sales but cooperate on curriculum design and best practices, and refine over time. And we’d solve the talent crunch at the same time.

But as long as we culturally believe that College is a right of passage and all knowledge should reside within ivory walls, we’ll never get back to a societal organization that made sense for thousands (and thousands) of years (as apprenticeships date way back to the beginnings of ancient civilizations) and still do.

It’s Not Green If

It’s not green if:

  • it’s always on and using full energy requirements (even if it uses less energy than a previous model)
    Some systems can’t be turned off, even if they are only used (on average) five minutes a day because they have to monitor for, and respond to, exceptional events. But if they draw the same amount of power whether they are performing a function or just listening for a signal, they aren’t green. A green system will sleep when not required, and wake up when a signal is received, and in the case of computers, utilize only a fraction of full power to maintain the contents of active RAM.
  • production or disposal is less environmentally friendly than other options
    Truly green products do not contain hazardous materials and are designed so that they are easily recycled or the raw materials are easily reclaimed for future reuse. In addition, the production should require less power and water than previous generations.
  • you simply install new software on old, energy hogging, hardware
    Taking an old PC with a 300 watt power supply and installing Linux does not make it green.

and, finally, it’s not green if:

  • it’s painted green
    Taking an old product and painting it green does not make it green!

ERP is NOT Always the Answer

Reading this recent article on “Mitigating Risk and Exposure from Subsidiary Operations” in Industry Week, one could get the impression that the only way to mitigate risk is to deploy one or more (connected) ERP systems to manage corporate data. Nothing could be further from the truth. While you do need consistent data and compatible systems, you don’t need an ERP. But I guess I should have expected such misleading advice given that the article was written by a VP at SAP, one of the biggest ERP vendors in the world.

According to the article, in order to mitigate risks to the company’s supplier, quality, liquidity, financial reporting, and unbudgeted spending, a company must streamline and automate mostly manual systems to:

  • enable the sourcing group to automatically provide information on preferred suppliers and negotiated terms to every subsidiary
  • enable headquarters to have ongoing visibility into cash-on-hand and receivables and payables across the organization
  • streamline the financial consolidation process
  • streamline inter-company purchasing transactions
  • implement collaborate processes such as forecasting and budgeting

Furthermore, according to the article, to accomplish this automation, a company needs to either:

  • deploy the same ERP system across the company,
  • deploy a two-tier ERP with simple data integration, or
  • deploy a two-tier ERP with process integration.

First of all:

  • A (cloud-based) SaaS e-Sourcing/e-Procurement platform with contract & supplier management can maintain preferred suppliers and terms and be accessible by every subsidiary.
  • A shared (cloud-based) SaaS accounting / finance system will allow headquarters to have a view into each subsidiary’s financials …
  • … and this shared system will streamline financial consolidation.
  • A (cloud-based) SaaS e-Procurement system will streamline inter-company purchasing, and
  • a cloud-based inventory / distribution / warehousing / logistics management system will allow for collaborative forecasting and budgeting.

So you don’t even need an ERP at all to accomplish the stated goals. Furthermore, while you do need integrated data, you can maintain this data with a simple relational database and integrate it using an off-the-shelf data analysis package with good ETL (extract-transform-load) tools that can merge flat-file data dumps from each system into one file/database for analytics purposes.

This isn’t to say that an ERP at headquarters to maintain master data isn’t worthwhile, just that you don’t need one, and that you certainly don’t need ERP deployments at all of your subsidiaries to accomplish the goals, which is important because enterprise ERPs generally cost seven figures and the cost is generally not justifiable for a small subsidiary.

Overqualified Candidates are Truly Rare …

… and rarer still are instances when you should pass on these candidates. A recent post over on the HBR blogs that asked if you “should hire an overqualified candidate” made some great points about the assumptions made by Hiring Managers when presented with “overqualified candidates”, and hinted at a few others.

Most Hiring Managers misunderstand what overqualified is
A candidate is only over-qualified if they exceed the skill requirements of the job. This means that the following candidates are not overqualified:

  • candidates with an advanced degree that exceeds stated educational requirements
    because the education might not be that relevant anyway
  • candidates with considerably more years of professional experienced than expected
    because if most of a candidate’s experience is in a different role (because they just changed career paths a few years ago), the experience with respect to specific skill requirements could still be minimal
  • candidates with a lot of experience in similar roles in the function
    because candidates with 20 years in tactical order placement and processing would not have a lot of experience in strategic negotiation, a major requirement for sourcing professionals today

Today’s job definition will not be tomorrow’s job definition.
Business is evolving as rapidly as the technology that drives it evolves, and this means that the requirements for a role are no longer static. If the job responsibilities are evolving rapidly, you will need a candidate with more education, skills, and experience than the job requires today to keep up.

There’s nothing stopping you from paying a candidate what he or she is worth.
Maybe you planned to pay 60K, but if you get a candidate who is so perfect for the role that he or she will be twice as productive, and you can get that candidate for 90K, you’re getting someone who can do the work of two people for only 75% of what it would cost you to hire two lesser skilled candidates.

Just because a candidate is overqualified doesn’t mean that he or she will be bored or move on quickly.
This particular misconception drives me nuts. Some jobs are always challenging. Like sales. You never know what the customer is going to want. Or development. Technology is always changing and you never know what new technology is going to pop up that you will have to integrate with or what new bug will appear in the next release that you will have to track down.

Not every candidate wants your job.
Not everyone wants to be the boss … and, in fact, a candidate who has been the boss and decides that she would rather spend her days getting work done instead of fighting fires, going to a never ending stream of management meetings, and micro-managing lesser qualified employees who can’t keep on track without constant guidance is less likely to try and take you job than an overly ambitious over-achieving up-and-comer. If you create the right position for the individual with the most impressive non-boss title you can give them, pay them well, and free them to do what they want to do, they will likely be more than happy to leave you to you own personal boss-hell while they build systems that work, successfully source strategic categories, and design and implement new processes for efficient operations.

Bottom line, there are very few overqualified candidates and fewer still who would not make a good hire if you pay them well and give them the opportunity to shine (because most people would rather complete a task and have a sense of accomplishment than “be the boss”). So if you get a very qualified candidate, the first thing you should do is get her in for an interview before the competition does — because she is the type of candidate you want.

Demand for Procurement Systems is Up In General

But, as far as I am concerned, the specifics are still in question. Over on Software Advice, Michael Koploy recently published a post on “2011 Market Trends: Procurement Systems” where he noted that the six trends he’s following, namely:

  • Demand
  • Cloud Adoption
  • Application Usability
  • Strategic Sourcing
  • Spend Analytics
  • Contract Management

With respect to the first four, he’s definitely right. After 2-3 years of spending freezes, and displacement of seasoned pros from big shops to mid-tier shops, pent-up demand is nearing an all time high. Also, a lot of shops, especially in the mid-tier, have figured out that they’re not IT, shouldn’t try to be, and want the IT to be someone else’s headache. Today’s generation of workers expects usability, and won’t settle for anything less. And with continuing pressures to cut costs (or lose your job), a number of organizations are finally getting behind strategic sourcing, even if they’re not entirely sure what it should mean to them.

But I’m not sure about the last two. Yes, demand for “BI” and “Analytics” is up across the board, but I’m not still convinced that most organizations have any clue whatsoever as to what real “spend analysis” is.

Spend analysis is:

  • NOT automated cleansing and mapping
    Sorry, but someone else’s rule set will not be anywhere close to 100% applicable to your organization’s data, and a rule set only catches known screw-ups in data entry, not unknown ones. Let’s say you’re in IT. Then HP obviously means Hewlett Packard. But if you’re in construction, it could just as easily mean Harry’s Pumps (or, if you’re in apparel, Hilary’s Pumps).
  • NOT automated Top N reports
    While it’s important to track your Top N suppliers, categories, etc., the greatest opportunities for savings aren’t necessarily going to be in your Top N categories or with your ToP N suppliers. Even without an analytics system, chances are your Procurement people have a pretty good idea who the Top N suppliers are or what the Top N categories are and aggressively negotiating them. In many organizations, the biggest opportunities for savings are in the Next N categories and in better optimization of the Top N categories that goes beyond simply identification. In the first case, let’s say the Top N are 40% of spend and the Next N are 30% of spend. Let’s say the immediate opportunities for savings are 3% in the Top N and 9% in the Next N. That’s 1.2% savings on TCO on the Top N and 2.7% savings on the next N. Which is greater? Also, let’s say a number of categories use a common, pricey, metal or mineral that accounts for 30% of total cost and that, if demand was aggregated across the categories, the average cost could be chopped by over 10%. Well, that’s a 3% savings if you buy the metal or mineral on behalf of your suppliers. A Top N report ain’t gonna show you that!
  • NOT a Freakin’ Dashboard
    A dashboard only tracks progress on identified opportunities. It does not track progress on unidentified opportunities! It only allows you to see that you’re not screwing up something you just fixed, it doesn’t show you that you’re screwing up ten other things.

But when most people make their purchase decisions, this appears to be what they are evaluating based on what they buy and how they implement.

Then there’s Contract Management. To be useful to Procurement, a Contract Management (CM) has to do more than simply store and index contracts for easy retrieval. While it’s important to be able to quickly put your finger on a contract when a dispute arises, that’s not management. That’s e-filing. In the context of Procurement, true management is tracking purchases against the contract in near real-time and insuring that before an invoice is paid, it’s paid at contracted rates. This requires some integration of the CM system with the e-Procurement and/or e-Payment system.

So far, most CM systems are still being bought stand-alone or loosely coupled.

In other words, demand for Procurement Systems is up, but not always for the right reason. And this includes demand for new reverse auction features. I’m getting tired of repeating myself, but I guess I have to say it again.

Listen, bub, a reverse auction IS NOT an advanced sourcing application. If you want real savings, you need a decision optimization system.