Category Archives: rants

I’m Glad I’m Not a Pundit!

It seems that all the pundits in this space are doing these days are bashing other pundits about missing the point while missing the point themselves. Case in point: Jon Hansen’s recent bashing of Jason Busch*5 (of Spend Matters) over on Procurement Insights where he accused him of remodeling the city while Rome burns. (Followed by another bashing on how the industry he represents has lost its objectivity through familiarity.)

According to Jon, Jason should be more focussed on OECM punting Ariba and taking a 20M hit in the process and what the implications therein are, or that Ariba lost 3B on 1B worth of sales between 2001 and 2005 while suffering a number of implementation failures, then on ways to restructure Ariba for better performance*2, and because Jason’s not, according to Jon, Jason’s missing the point. Well, the first story is important, but until we get the full picture, which could take months, as we don’t know how much of the blame rests with Ariba and how much lies with OECM. (Remember the i2-Nike fiasco? While Nike tried to place all the blame on i2, it was as much their fault as i2’s. First of all, if you’re going to buy predictive modeling software, you should understand the limitations of what you are buying and the requirements of proper use!) And, in the internet age, the second story is ancient history … what’s more important is how they have been performing since then.

Don’t get me wrong — I’m not defending Ariba*1, just pointing out that there are three sides to every story and until we get all three sides (OECM’s, Ariba’s, and the truth), I don’t think it makes sense to start conjecturing on whose fault it is or (as Jon seems to imply) what Ariba did wrong. Let’s face it, this isn’t the first big IT failure, and since most organizations don’t really understand IT and won’t pay for that understanding (and, thus, can’t tell the difference between a proposal that illustrates the company knows what it is doing and a proposal that illustrates that the company is run, and staffed, by a bunch of baboons), it won’t be the last.

The real “big picture” is focussing not on the news story of the day (which, according to his post, he apparently does in all six of his blogs), but on educating the public so they don’t make the same mistakes. That’s why I don’t run stories on the latest deal/customer of Company X (irrelevant), the latest prediction of Research Firm Y (which may or may not materialize), or the latest headline in the WSJ (as most print publications are getting more sensationalistic by the day trying to maintain readership and forgetting what true journalism is really about). This blog is, and will stay, about education. That’s the “big picture”. (And that’s also why less is more! I could publish six posts a day if I wanted to, but if I overloaded you with information-free gibberish, what would you learn*4? You can’t drink from the fire-hose!)

Now I’m sure I’ll be the subject of his next rant*3, but I don’t care. I only care about what fellow supply chain bloggers think, not what media-hungry Bill Mahers think (whose rants don’t always make sense to me), focussed on the most sensationalistic stories they can find, have to say.

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*1It’s fairly well known I’m not their biggest fan, but I do try to be fair, and my history of vendor reviews speaks for itself.

*2 Given that Ariba was involved in a major failure, it’s now critically important that the focus is on finding a fix before it happens again as opposed to beating the issue to death.

*3 It wouldn’t be the first time.

*4 And would there be anything new in those? All you can really do at that speed is repackage existing news stories and content as you would be leaving yourself no time to think.

*5 I’m not defending Jason (as he can defend himself), just using his most recent bashing as an example of the absurdity of the situation.

Sometimes the Cantankerous Supplier is Right!

Even if they are too late with respect to demonstrating their correctness.

But let’s back up. Recently, on the Purchasing Certification Blog, Charles penned a great post on “the real reason buyers don’t want to give suppliers feedback”, which, in his words, were

BECAUSE WE DON’T WANT TO PUT UP WITH THIS CRAP!

where the crap in question was the salesperson effectively saying, with their incessant badgering that no other company can produce the same product of the same quality at the same price with the same service, that you are stupid. You don’t know how to make a good decision and you don’t know how to evaluate prospective suppliers.

As Charles’ points out, it happens all too often, and most of the time, the supplier is full of crap. But sometimes the supplier isn’t — and this is often true in custom manufacturing and services. I see it in IT all the time. The buyer doesn’t really understand what’s involved in building or customizing a piece of enterprise software or system and goes with one of the low bids and ends up getting a stinking pile of crap that not only costs 50% more due to project and budget overruns, but is delivered full of bugs, doesn’t include 20% of the originally specified functionality, and takes three times as much manpower to support as it should. In the end, by the time all of the extra service and support costs are factored in, it costs three times as much as the high bid from the one firm that really understood what it was doing. The same is true in custom manufacturing. There are some corners that can’t be cut, and accepting a bid that does so leads to long term cost ramifications.

However, the supplier should still back off once the buyer has made an award decision, even if it is the wrong one. Because it is not the buyer who made the stupid decision, but the supplier. If the supplier truly had a better product of a better quality at a better price and service level, then the supplier should have taken the time to provide the buyer with the education she needed to understand that when the supplier had the opportunity. Instead of chest thumping about how great they are and how they are so much better than the competition, the supplier shouldn’t have even tried to sell at all. They should have said “we know we can meet your needs better than any of our competitors, but that’s not important. What’s important is that you understand why we can do that. For you to truly understand how we are better, you need to understand what the major drivers of cost, quality, and service are around this product. So we’re going to help you with that.” And if they truly were the best solution, then the buyer should be able to see that and choose them. (And if they truly were the best solution and the buyer didn’t see it, is that a buyer the supplier really wants to be working with?)

And regardless of whether or not the supplier has the best solution or not, once the buyer makes her decision, the supplier has to back off, and this is the only appropriate response from the supplier.

“We’re very sorry to hear that you chose someone else. We still believe we could provide you the best overall value with respect to your needs and would appreciate the opportunity to try again at the appropriate time. Could you let us know when you expect to be going out to market again for this product so we can contact you again at the appropriate time to request the RFP? Also, if your chosen supplier proves unable to meet all of your needs, please feel free to reach out to us at any time. Thank you again for the opportunity and we hope to have another opportunity to compete for your business again in the future.”

Anything more and the buyer has every right to blacklist the supplier.

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If You Want to Survive as a Manufacturer, Just Get Efficient

Industry Week recently ran a lengthy article on how “the manufacturer’s world has changed forever” which purported to provide advice on how manufacturers could learn from other’s successes and mistakes and gain a greater share of customer preference, the key to success in today’s everyone-is-an-expert marketplace.

The article had seven tips, which were good, but generic and just as applicable to retailers and distributors as they are to manufacturers. The reality is that the key to success for a manufacturer is efficiency. An efficient manufacturer has a high rate of production, produces minimal waste, maintains high quality, and is very cost efficient — to the point where its total cost per unit is lower than that of its competitor. That’s the ultimate key to survival in this economy — being more competitive than your competitors.

Thinking like today’s buyer is for the designer.

Getting rid of the dead wood is implied.

Anticipating change is a fact of life.

Determination is a timeless key to success.

Urgency is the normal state of affairs today.

Inspiration is the sign of every true leader.

Alignment is the first step to getting efficient, but …

until a manufacturer is efficient, it’s chances of survival are slim. So just get efficient.

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Spreadsheets Will Cost You Billions

I’ve told you many times that spreadsheets, the cockroaches of the workplace, can cost you billions, but I’m not sure that you’ve been listening. So I’m going to remind you of two situations where poor spreadsheets literally cost a company billions. As per this classic article in CIO on eight of the worst spreadsheet blunders ever:

Fidelity Loses $2.6 Billion

In January 1995, an accountant omitted the minus sign on a net capital loss of $1.3 Billion when transcribing the net realized gain from the funds financial records from one spreadsheet to another. As a result, they estimated that they would make a $4.32/share distribution, a number that was off by $2.6 Billion. Needless to say the shareholders weren’t happy when the truth was discovered.

Fannie Mae and it’s $1.13 Billion “Honest” Mistake

In a news release back in October 2003, Fannie Mae stated that a review of the third-quarter financials revealed a $1.136 Billion error in total shareholder equity as there were honest mistakes made in a spreadsheet used in the implementation of a new accounting standard.

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I’m Starting to Get Sick of all this Working Capital Management Talk

Ever since the recession hit full swing, it’s been working capital this and working capital that. And I’m getting tired of it. And it’s not because I don’t like working capital management. In theory, when it’s done right, working capital management is worth its weight in gold. The problem is, at most companies, it’s still done very, very wrong, and ends up being the lead weight that drags the company down until it drowns.

Here’s what usually happens. The company starts by:

  • Paying some invoices early to take advantage of favorable currency exchange rates … which is good and the right thing to do, and then it continues by
  • Paying some other invoices early to take advantage of early payment discounts … which is good for the company, but not necessarily good for the supplier. (If it allows the supplier to avoid taking high-interest loans, it’s good. But if the company is just taking advantage of their financial problems, it’s not.)

And it enables these early payments by:

  • Delaying payment to other suppliers … which is not working capital management at all as it risks the suppliers’ ability to deliver and jeopardizes the supply chain.
  • Delaying payment to contractors … which could jeopardize the contractors’ solvency if they’re small and it goes on for too long.
  • Delaying raises and bonuses … which does wonders for employee morale.
  • Delaying expense reimbursements to its employees (from two weeks to four, four weeks to eight) … which is just wrong. Employees aren’t a company’s piggybank.

And then, when there’s no slack left in the system, it:

  • Lays off 10% of the workforce.

And proves it doesn’t know a damn thing. And that’s why I don’t like hearing all this substance-free hype about working capital management.

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