Category Archives: rants

Don’t Fall for the FUD!

Now that money is trickling back into technology budgets, many vendors are going on the offensive again. As a result, you need to be ready for the emergence of the vendor FUD (Fear, Uncertainty, Doubt) machine that is sure to resurface. We’ve already tackled how you calculate the true TCO/TVM of each product under consideration, thereby helping you to dispel the first piece of FUD you’re sure to hear, which will be along the lines of “we’re the cheapest and have the highest ROI, while our competitor is the most expensive and your ROI will be negative if you go with them“, but once you get past this, any vendor with a decently aggressive sales force will have more FUD loaded up and ready to fire (if they feel they are at a disadvantage). Here are three common pieces of FUD that, to be blunt, don’t mean nothing.

  • Our competitor is being sued (by us).So? Many of the lawsuits in this space are nothing more than desperate attempts by the bigger vendors, who haven’t innovated in years, to literally sue their smaller competitors out of commission with baseless lawsuits that plaintiff hopes will be too costly for the defendant to defend (as the plaintiff will attempt to draw the discovery phase out for years before the case gets inevitably thrown out).
  • Our competitor can’t do Fliggle-Flaggle-Floogle.Many vendors with less competitive or innovative offerings will focus on one or two impressive sounding (but essentially worthless) features that their competitors don’t have and turn up the tech talk dial to eleven in hopes of confusing you into buying their product. Don’t fall for the tech talk. It’s not about the technology, but about the value it can deliver to your organization. And sometimes its best not to buy the technology at all, but to contract with a consultancy or BPO who can maximize its potential (especially if the value curve flattens out quickly, as it does with tactical spend analysis [reference]).
  • You have to go all-in.Many providers will insist that you have to buy the whole suite, complete with licenses for every user in the organization, or you won’t realize the full value available to you. So what? It’s not about how many pennies you can squeeze out of the technology, but about how many pennies you can push down to the bottom line. Let’s say you can buy a solution for Procurement only from a competitor for 50K and that you expect you would drive 500K in savings from the purchase. Now let’s say you can buy their solution for the whole organization for 250K and drive 1.250M in savings. Which is better? The Procurement solution. It has a 10X ROI, compared to the 5X ROI the full organizational solution offers. Furthermore, when you look carefully, you see that the extra 200K only saves you an additional 750K, which is an ROI of only 3.75X. Yes, you want to save that additional 750K, but if you keep looking, you might find another 50K point solution from another vendor that will save you 500K of that 750K, which gives you another 10X ROI (and makes the organizational solution a bad buy since you’d now be spending another 150K to save 250K, which gives you an additional ROI of only 1.67X …. which means that one stumble on the organizational solution path and you would have been better off with the (much) less expensive and (much) lower risk point solutions).

And don’t forget, if the management/ownership team hasn’t changed much, what Tweety Bird has been saying for years still holds true. Don’t get fooled. Once a bad old putty cat, always a bad old putty cat.

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Yes, Austin, Dashboards are Dangerous and Dysfunctional!

Given my long-time stance that dashboards are dangerous and dysfunctional, I was absolutely thrilled by this recent article in Intelligent Enterprise on how “metrics can lead in the wrong direction” which quoted Robert D. Austin, author of Measuring and Managing Performance in Organizations who said:

“Kaplan and Norton’s cockpit analogy would be accurate if it included a multitude of tiny gremlins controlling wing flaps, fuel flow, and so on of a plane being buffeted by winds and generally struggling against nature, but with the gremlins always controlling information flow back to the cockpit instruments, for fear that the pilot might find gremlin replacements. It would not be surprising if airplanes guided this way occasionally flew into mountains when they seemed to be progressing smoothly toward their destinations“.

If the doctor had a hall of heroes, Robert would have to be the first inductee! Not only will your staff be lulled into a false sense of security when all of the gages in the dashboard are in the “safe” zone (and not look for the faulty wiring about to spark a devastating explosion), but, and this is especially true if their compensation is based on those numbers, they’ll start to perform dysfunctionally if such behaviour improves the score. For example, many call centres once thought (and some still do) that number of calls processed was a good metric. The result? The reps, who do their best to get you off the phone as soon as possible, don’t take the time to understand the true nature of your problem and instead focus on a “quick fix” to get you going again (even if such a fix, like “reboot”, doesn’t fix the issue and will only result in the problem re-occurring again and again). As a result, not only did the number of calls processed a day increase, but the total number of calls processed by the organization increased, because people have to call multiple times to get their problem solved. Not good. Not good at all.

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Training is an Imperative … Just Do It

A recent article on Industry Week on “the training imperative” noted that, despite the record high unemployment rates, many U.S. manufacturers are having difficulty finding the right people with the right skills to fill a variety of positions. It’s not so much a skills shortage as it is a skills gap — and there’s looming concern that the gap will grow as baby boomers begin to retire. (Now, if they’d also stated that this situation holds true throughout the supply chain, Charles would be doing the river dance right now, because it does. And only a few of us seem to be willing to acknowledge this.)

Why is this the case? The article offers a couple of explanations, noting that what was considered adequate 15 years ago would be nowhere near adequate today and, due to the outsourcing of low-skilled jobs to low-labor-cost countries, the remaining jobs require a much higher skill level, and the average has gone up in terms of the amount of training needed per employee.

But the reality is that this shouldn’t be a problem. Whereas training programs were few and far between in the past, we now have private training and certification programs; more and more colleges and universities instituting new certificate, diploma, and degrees in manufacturing and supply chain every term; a number of online programs that teach basic theory and skills; and, in manufacturing, a number of e-training providers are now providing simulation technology that will teach people how to operate a piece of machinery or fix a machine without actually having to practice on a multi-million dollar piece of equipment. (This is becoming especially common in the Oil & Gas sector.) All you have to do is commit to the programs and your people will get where they need to be. Companies just need to be part of the solution and not part of the problem.

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If You Won’t Splurge for Supply Management Technology (Rant)

When:

  • Spend Analysis can save you 10% to 15% of your total spend,
  • e-Negotiations can save you 5% to 15% of your total spend,
  • Strategic Sourcing Decision Optimization saves 12% above and beyond what you can save with e-Negotiation alone,
  • Contract Management can save you 13% on your contract labor and professional services spend alone,
  • e-Procurement will quickly reduce maverick spend by 36% or more,
  • Supply Chain Finance / Working Capital Optimization platforms can decrease your cash conversion cycle by up to 83%, and
  • Global Trade Visibility systems can decrease transaction processing time requirements by up to 96%

… and that’s just the tip of the iceberg with respect to the total savings available to you, if you won’t splurge for supply management technology, especially when many enterprise systems can now be obtained at a cost of only five figures a year (which is ten times less than they used to cost), then you’re a Complete Idiot and should join your kin in the tundra biomes of the Arctic. Continental, Delta, United, and Alaska Airlines all fly to Anchorage, and you can book flights through all of the major web portals. Get to it! The rest of us need to move forward.

If you Want to Increase Your Value, Don’t Forget the Customer

As a Procurement Professional, your primary focus is on reducing spend, because that’s the greatest contribution to the bottom line that an organization can make. When one dollar of savings equals ten dollars of profit, it’s pretty easy to focus on squeezing every penny you can out of that supplier. But you can go too far. For example, if you push the supplier’s margin to minimally sustainable levels, and raw material costs rise, either the supplier is going to go belly up, or sacrifice on quality (with cheaper materials or processes).

If the supplier sacrifices on quality, and you don’t realize it until after the fact when customers start returning goods, your organization is going to have trouble giving the customer an excellent customer service experience, which is key not only to customer retention, but to profit. I was reminded of this when I came across this recent article in CRM buyer on the value of excellent online customer service. The article notes how a recent survey has revealed that customers are willing to pay a 9.7% premium for good customer service (and a 10.7% premium for customer service online). In other words, the only thing most organizations have to do to increase revenue by 10% is provide quality service around a quality product!

So keep this in mind the next time you’re trying to reduce an already good deal by an additional percentage point. If that’s the difference between good quality, and a product that is defective 10% of the time, then that 1% savings is costing you 10% revenue, which is not a good deal at all.

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