Category Archives: rants

Teaching our Children (Not) Well

Editor’s Note: This post is from regular contributor Norman Katz, Sourcing Innovation’s resident expert on supply chain fraud and supply chain risk. Catch up on his column in the archives.

(Title with apologies to CSN&Y.)

I saved an article from the October 4, 2009 edition of my local newspaper because I knew that it would make a great blog topic: Some Russian business leaders have created an MBA program that teaches bribery and bureaucracy. Having such extensive experience themselves these business leaders want to pass along their knowledge of these topics to up-and-coming executives.

(It makes me wonder if it’s okay — if not a necessary requirement — to cheat to get a good grade in this class. Hmmmmm … I also wonder what it takes to get a scholarship?)

It’s bad enough that the percentage of surveyed teens who believe unethical behaviour is needed to get ahead in business jumped from 22% in 2005 to 41% in 2007 in a Deloitte / Junior Achievement poll. Now we’ve got business leaders providing an education on how it’s done.

(I think those were likely American teens surveyed. It’d sure be interesting to see the same survey’s results from Russian teens.)

In comparing his school’s curriculum, the dean is quoted as saying that Harvard “[is] a business school of the past, I have to say. But a business school of the future has to be different.”

Around the time of this article several Broward County (FL) commissioners, school board members, lobbyists and fund raisers have been removed from office and/or arrested by the FBI on a long laundry list of fraud, corruption, and ethics violation charges, and more people are due to get snared in the legal net being cast. I have to think that maybe the Russian school dean has a valid point in his comment. Ethics — or so it would seem — are passe and the foundation of the future would seem to be fraud.

No, no, no! I don’t want to believe this! But it’s tough to turn a blind eye to the endless acts of shenanigans when they seem to be escalating in frequency all over the place. Corruption seems to be the new norm (no pun to my name intended). Is fraud our apocalyptic future?

How weak has the fortitude of people’s integrity become to be so swayed by corruption and for sometimes such small dollar amounts? Do an Internet search on the latest Broward County corruptions and you’ll learn that these folks sold out for nothing greater than five-figure amounts, and that these were on the low end of the scale at that.

Instead of teaching future business leaders how to cheat and work around the system we should be educating them on how to fix the system. Instead of teaching kids how to con one another, capitulate to corruption and gravitate to greed, we should be educating them on how to stand up for oneself even in the face of adversity, instilling values and a belief that doing what’s right is what’s right and that there can be plenty of profit in doing so.

Where will we find these educators? I hope that they are among the vast majority of people who live their lives on a straighter path. They are the politicians and business leaders of today who have turned away from greed and corruption and stick to the right behaviour. They are the retirees who “remember when” and talk of the days when a handshake was able to seal a deal and a person’s word meant more than a signed contract. These are the folks who need to guest lecture at schools and universities and let the future employees, employers, and leaders know that ethical behaviour and success are complimentary, not adversarial, concepts. These are the people who — through their interactions — are able to promote good behaviour and explain why bad behaviour is not acceptable in a civilized — at least for the present — society.

Let us teach our children well.

Norman Katz, Katzscan

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Social Media May Increase Awareness, But Will It Increase Acumen?

In a recent article in Manufacturing & Logistics IT from i2 SCL contributors on Social Marketing & Supply Chain Management: The Next Consumer Data Challenge and Opportunity, the authors quote a recent Forrester Research report that states that three of four adults who go online in the US are leveraging social content on a regular basis and state that it’s a resounding yes that retailers and consumer product companies can leverage these tools and the demand signals they render to better run their supply chains.

I’m not sure I entirely agree. First of all, the concept of “social intelligence” is still much more nebulous than “business intelligence”, which is still quite nebulous and not always a successful endeavour (and, historically, BI projects are famous for low success rates, high costs, and time overruns). How can you leverage what you don’t understand?

Secondly, the social media marketplace is scattered. Some of your customers will be on MySpace, some on Facebook, some on Linked-in, some on Twitter, some on Ning, and some on dozens of other sites. Unless you can be everywhere, you could be missing a sizeable portion of your customer base. And even if you are, that’s still only 75% of on-line customers. What about the rest?

Thirdly, most users are quiet unless they have something to gripe about. So while you’ll likely have no problems getting feedback on everything your customers don’t like, you’ll likely have limited feedback on what they like and your surveys will be skewed. That doesn’t make for good decision making.

Any differing opinions?

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7 Sourcing Secrets More Than 2 People Should Know

A recent article over on Cracked listed “7 Secrets Only Two Living People Know” (for some reason … that the doctor must admit he doesn’t understand in a few of the cases). While entertaining, it did cause me to ask why there are so many truths in sourcing that most people still don’t seem to get. Since some days I feel like only 2 people know the following, I decided I should do my own post on 7 sourcing secrets more than 2 people should know. Because you really, really, really should know the following sourcing “secrets”. After all, they’re truths, even if no one’s bothering to tell you. So without further ado, here they are:

1. Spend Analysis is flexible Data Analysis, not canned reports on a data warehouse populated via automated classification

Real spend analysis is the ability to dive into your data and find out not just where your true spend is higher than it should be, but why. This requires you to have the ability to slice, dice, and cube your data on any dimension you can think of, because you’re never going to know where the losses are until you find them. (After all, if you knew where your holes were, wouldn’t you have plugged them already?) Canned reports on a static data warehouse can only tell you how fixes you’ve already implemented are working, not where the holes are. Furthermore, “automated classification” just doesn’t work. Any good consultant worth his salt can load your data into a real data analysis product and find two dozen mistakes in twelve minutes. You need the ability to define and redefine mapping rules on the fly as all automated classification can do is fix previously identified mistakes. It can’t identify new ones. Software isn’t intelligent. People are.

2. e-RFX is electronic support for the full information and quote gathering cycle, not just bid collection

If all your e-RFX does is allow you to collect bids, it’s not e-RFX. It’s e-RFQ, and a poor e-RFQ at that. It should allow you to create questionnaires, surveys, and entire RFX packages with closed and open-ended questions, allow you to compare responses side by side, and allow you to collect not only all of the pricing, but all of the discounts, rebates, and promotions the supplier offers. It should help you manage the process, guide you through it, and support data import and export in open formats so that you can also use analysis, optimization, and contract management tools.

3. A Reverse Auction is simply an online auction event, it’s not a substitute for proper sourcing project management

I follow the space closely and not a month goes by where I don’t see an article on how Company XYZ is now refusing to participate in online auctions. When you dig down, this is because they had a horrible experience. When you dig deeper still, you find out it is typically either because Company ABC simply threw an auction tool at the supplier and told they had to bid through the tool or lose all their business or Company ABC threw up an auction tool and said they’d award to the lowest bidder but ended up going with a different supplier, usually the incumbent, after the auction closed.

I find this appalling, because e-Auctions, like e-RFX, are not only a great time saver, but a great way to bring parties together from around the globe and allow them to participate in an e-Sourcing event that, when run right, is more transparent, educational, and profitable for all parties concerned than traditional methods of sourcing where you get bids by phone and fax until you find three bids you like and then meet in a room to “negotiate” until a deal is struck with a winner. (And I use the term “negotiate” loosely because old style purchasing methods usually boil down to the party with the most leverage beating up the party with the least leverage.) But this is only true if the event is run right. This takes proper project planning and management. Tools can facilitate the process, but they can’t replace it.

4. Decision Optimization is for everyone, not just for math geeks

I’ll admit this is my own personal bandwagon, but having seen savings of over 40% and ROIs of over 400 on a number of projects, and average savings in the 10% to 20% range and average ROIs of 5X to 10X or more, I think I have a good reason for riding it. Despite the fact that true self-service decision optimization for sourcing has now been around for almost a decade, it’s still the “black sheep” that almost no one uses — and it’s a real shame because now is the time you need it most. Furthermore, the new tools coming out of the leading providers are a lot more usable than the first generation tools and can be easily used by any college graduate who can build a cost model and specify some business constraints. In other words, if you have the pre-requisites for strategic sourcing, you can use these tools to save time, to save money, and make better, more informed, decisions.

5. Contract Management is just a new name for document management with integrated monitoring, it’s not a replacement for contract managers

Lately I’ve noticed how contract management is coming into vogue. And while that’s a good thing, it’s important to understand what contract management is and isn’t because it seems that some vendors, and some publications, are promoting the new offerings as the latest and greatest tools to solve all your contract woes when the reality is that these tools are nothing more than document management tools with monitors and alerts. I won’t deny the importance of having a good contract management tool that can monitor expiration dates, contract pricing, and, most importantly, invoiced pricing against contracted rates, but these tools, even if they contain sophisticated contract creation capabilities, can’t replace a contract expert, a master negotiator, or a good spend analysis tool that can uncover devious work-arounds by less-than-reputable vendors looking for a way to make back that buck they gave up in negotiations. (For example, I’ve talked to a number of consultants who told me how they found that some office supply management vendors regularly changed SKUs to bill you twice as much for that pen as it’s really worth.)

6. e-Procurement is tactical, and not a substitute for e-Sourcing

There’s still a lot of confusion in the marketplace between what is e-Procurement (and how it relates to P2P, EIPP, and the other new acronyms old players are coining to differentiate their new, streamlined, offering) and what is e-Sourcing, even though it should be fairly clear cut (as I attempted to outline in this post on why it’s sourcing and procurement). A few of the e-Procurement vendors are even claiming that you don’t need sourcing at all if you use the wisdom of crowds (which is not the case because there’s a big difference between a great deal on a commodity office supply and a great deal on raw cocoa or custom circuit boards, which are not commodities). Sourcing is the strategic part of the purchasing cycle, procurement is the tactical. You need both, and one is not a substitute for the other.

7. It’s not what you know, it’s what you can learn

Plain and simple,

  • it doesn’t matter if you’ve been doing it that way for 20 years if it’s not optimal,
  • shift happens, and
  • whatever happens, the world of tomorrow will not be the world of today.

You have to keep learning. That’s why this blog is here.

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Will Poor Spend Management Be The End of Harvard?

Back in August, after reading Nina Munk’s Hard Times at Harvard article in Vanity Fair, I asked if Poor Spend Management Will Be The End of the Ivy League after Harvard’s endowment lost a whopping 8 Billion in the first four months of its last finical year. This amount, which is greater than the entire endowment of Columbia University (at 7.1 Billion) put Harvard in dire straits, especially since Harvard’s President warned of an expected 30%, or 11.1 Billion, loss. (The actual loss was about 11 Billion, and the full report can be found on the Harvard Web Site.)

Then I read this article over the weekend, which noted that Harvard University lost 1.8 Billion alone from the cash account it uses for daily operations through investments in high-risk vehicles (which included stocks, hedge funds, and risky assets), I started to wonder if poor spend management is going to spell the end of Harvard, at least we know it. However, what I really want to know is how could Harvard, with the famed Harvard Business School and Harvard Business Review, be so stupid? Even the dumbest companies know that, unless you have more than three months of operating capital, you keep your daily operations cash in savings accounts, and even if you have more than three months, you only invest it in low risk investments like money-market mutual funds which have a long history of slow and gradual changes (and not high risk stocks that can plummet overnight)!

All I can say is that I’m at a loss for words! Anyone want to chime in?

I Hope You Take More Care With Your RFP Responses Than This!

 

Pricing FAIL

Courtesy of the FAIL Blog

 

If your price changes sporadically every time you quote, for no apparent reason, you’re not going to look very organized!

Anyway, maybe this is why Wal-Mart changed their slogan from “Always Low Prices” to “Save Money. Live Better” because, as Vinnie recently pointed out, not all prices have been rolling back at Wal-Mart lately. Vinnie notes (as I have also noticed) that Mach3 Razors and dog food have been rising inexplicably, and I once walked into Walmart to pick up a can of coffee that was advertised at 4.97 the week before to find it had increased 60% to 7.97. So, while you will live better if you save money, you might not necessarily be saving that money at Wal-Mart.