Category Archives: rants

Societal Sustentation 44: Education Quality

Supply Management is hard. Real hard. And it’s only getting harder. SI has said it before, and it will say it again … and again — in order to excel at Supply Management a Sourcing or Procurement professional has to be a jack-of-all-trades and master-of-one.

But this is not an easy thing to do. The skill set required by today’s Procurement professional is longer than Santa’s naughty and nice lists put together and is growing by the day. And that’s just the basics. The EQ, IQ, and TQ required for an average Procurement professional to get through the day is enormous. It’s to the point where a person of average intelligence can’t cut it. It used to be that only the best and brightest could do law and medicine and engineering but now only the best can do supply management. And, to make matters worse, just EQ, IQ, and TQ is not enough.

A modern Supply Management Professional needs knowledge — and lots of it. With constantly changing market conditions, new inventions, and new modes of operation, whatever a supply manager knows today is unknown tomorrow. As new methods of production come online, old methods become cost prohibitive. As new products are invented, old products become obsolete. As market conditions change, old plans become irrelevant. And so on. And what you need to know changes by the day.

But where do you get that knowledge. Most universities have a curriculum that is still mired in old-school logistics and operations research. Most professional associations are still teaching you old-school negotiating tactics. Most blogs are mired in the noughts and still preaching the gospel according to Ariba and Emptoris (which no longer exist on their own). And the analysts … well, we’re not too sure just what they are inhaling before they do their preaching, tragic quadrants, and dangerous graves.

And education quality in general in North America is bad, with the US ranked 14th, and getting worse. Only one in seven people can do math. Potheads have a higher IQ than twitterers. And spelling and grammar? The best case is whatever the iPhone autocorrect feature suggests. So what do you do?

1. Find curious people.

Find people who want to learn and get smarter and more efficient on their own. That will seek out the nuggets of knowledge, internalize them, and try their best to incorporate those nuggets into their work.

2. Seek out those that have a higher than average IQ, TQ, or EQ.

Those with a higher IQ will be able to quickly grasp, internalize, and utilize new theories and methodologies. Those with a higher TQ will be able to master new technology faster and find ways to simplify it and train the rest of the organization on the key features. Those with a higher EQ will be able to work better as a team.

3. Make sure you hire people that excel in each area.

Having a mix of high IQ, TQ, and EQ people will create a well balanced team that can work together, adopt and exploit leading technology faster, and learn about new options ahead of your peers.

4. Encourage continual learning … and pay for it.

Bring back the training budget, and pad it well. Even though you’re going to pay more for these well educated, smart, tech savvy, team-oriented, curious people, that doesn’t mean you shouldn’t pay even more for training. In what other organization can a $1 of training take $100 off of the bottom line when the sourceror takes 5% off a category expected to be at rock bottom, gets the supplier to throw in a value-add warranty for free, or finds a new production method that shaves 50% off of overhead cost? Find people that want to learn, and continually educate them. The cost is nothing compared to the ROI you will generate.

So, Do You Throw Provider RFX Templates Out with the Packaging?

This post originally ran two years ago. (Link) SI is repeating this post because the majority of organizations still have issues with RFX templates of all shapes and sizes for all types of purchases.

So, do you throw provider RFX templates out with the packaging? That depends. If you have lazy, uneducated, or inexperienced Supply Management personnel (because your Procurement department was staffed like the Island of Misfit Toys), then you want to delete them as soon as you get them because, if a template exists for the product or service you want, it will be sent out more-or-less as is and you’ll get a specification that is two sizes too large, two sizes too small, or very irregular and not at all a good fit for your organization.

On the other hand if you have educated, experienced, go-getting Supply Management personnel who take the time to properly construct an RFX, going through the steps outlined in our many RFX series here on SI, then they do have a use. Specifically, as a check-list after the RFQ has been completely drafted to make sure that nothing was missed. Sourcing is complex these days and it’s hard even for an expert to include every relevant detail every time when time and resources are so scarce. There’s a reason that even hospitals and clinics use checklists, because it greatly decreases the chance of a (serious) error being made. If a vendor, that built a template as a result of analyzing dozens of events, included something in an RFX template, then, at least at one point in time, it was very relevant and, as such, should not be excluded from an RFX until a senior buyer confirms that the market or standard operating conditions have changed and that the question, cost component, or requirement is no longer relevant.

So, these templates do have their uses, as long as they are editable by senior buyers. Because, as explained in the last paragraph, over time, some parts of the template will become irrelevant and other questions, cost components, or requirements will become very relevant and need to be in all RFXs related to that product or category. If the senior buyers can completely customize the templates to the categories, products, and services of the organization and configure the tool so that no template is used out-of-the-box (until a senior buyer confirms that it is still accurate enough out-of-the-box), then the templates, and template features, have a use.

But as-is, the templates in many template libraries are probably still less useful than calling a supplier over the phone and saying you need a quote for customized circuit boards and doing three-bids-and-a-buy blind.

In other words, templates have a use, which is why the doctor encourages most vendors to have a library of templates that can be used as starting points, but their use, until customized by a senior buyer, and reviewed regularly, is that of a post-RFX creation checklist. Nothing more. And not understanding this can get your organization in serious trouble in its sourcing events.

When Are We Going To Wake Up and Stop Wasting Food!

Recently, Italy introduced a new law designed to reduce food waste which is being celebrated by farmers and restaurant owners as it simplifies the donation of excess food that ends up becoming food (or field) waste. Approximately 100 Million tonnes of food across the EU is wasted each year. (Source: European Commission) That amount of food would sufficiently feed at least at least another 100 Million people annually (as the amount of food a person needs in a year varies between 0.5 and 1 tonne depending upon diet, weight, etc.). This is just in the EU. In the US, recorded food waste exceeds 30 Million tonnes, and is probably much higher. (Source: Feeding America) That’s at least another 30 Million people that could be completely fed. Putting these numbers together, and assuming the average amount of food consumed by a person a year is 0.75 tonnes (and not 1), that’s about 175 Million completely satiated. There are almost 800 Million undernourished people in the world. If we assumed that they were surviving on only half the food they needed (which is not reasonable, as that’s barely sustenance, and a lot of these undernourished people are in developed countries and still eating enough to work), this says that the recorded food waste in 1/7th of the world’s population could cut the number of undernourished people in the world by half! By Half!

Italy is only the second country in the EU to adopt such laws (following a similar move by France earlier this year – Source: The Guadian), so let’s hope that at least in the UK, sanity reigns. Because in North America, and in the US in particular, it does not. It’s illegal in many cities to feed the homeless (Sources: NPR and MIC), even if the food is not passed its expiration date and untouched, or you are a Pastor (Source: The Daily Signal)!. In some states, game meat donated to shelters is burned (Source: Daily Caller). And even if you can donate food without getting fined and arrested, and someone gets sick because, while it was still good when you donated, by the time it was prepared and eaten it wasn’t (or it was contaminated when you received it with e-Coli and you didn’t know), then you can get sued for millions of dollars, so why take the risk?

This is why, as per our post from August, 2012 on why it’s Not Criminal, But it Should Be, America Trashes 40% of its Food Supply. It’s insane!

Food reserves have not recovered from the all time low, over 800 Million people, including almost one third of children in developing countries, are malnourished and the two richest economies in the world (the US and the EU) are collectively wasting enough food to solve over HALF of the problem. All this in a time when agriculture produces 17% more calories per person per day than it did 30 years ago. This is enough to provide everyone in the world with at least 2,720 kCal per day, which is 30% more calories than an average person needs. Instead, the cost of staples is rising, access to food by the lower class and malnourished is falling, and, because of stupid, stupid laws made by stupid, stupid lawmakers, the situation is getting worse. When it should be 10 times better!

As per our research from four years ago, there is no excuse for wasting more than 4% of food. (That’s still too much, but the 100% solution is always difficult to achieve right away. And when the 90% could be achieved tomorrow, let’s start there!) Not only would sanity (and laws mandating food donations and feeding the homeless instead of laws preventing this) reduce costs by $150 Billion and methane emissions by 22.5% (as rotting food makes up 25%), but the US would NOT have anyone undernourished! (14% of households in the US are food insecure! Fourteen Percent! The US is the richest country in the world, how can this be???)

Bravo France and Italy for finally doing something right! Let’s hope the rest of the EU follows suit so at least some people won’t go hungry!

RIP to the Big Idea!

This post appeared in its original form almost 5 years ago on August 31, 2011 when it was titled What’s the Big Idea. Since nothing has changed, we’re knocking it up a knotch with our borrowed spice weasel.

Seriously, like your predecessor’s Procurement, it’s dead and Buried! Inquiring (not enquiring) minds are in mourning. Because, as far as any of us can tell, there aren’t any big ideas any more. As Neal Gabler said in the New York Times article on the elusive big idea, we live in a society that no longer thinks big. And that’s bad. Why? In many fields of technology, there have been no big ideas for decades. Sure, we see new and better devices every year and sure the iPad Air Mini just came out and now you can chase Pokemon in the real world with your Pokemon Go app, but, let’s face it, the iPad Air Mini is a netbook with a touchscreen. A netbook is just a miniaturized laptop, and a laptop is just a miniaturized portable computer, and portable computers have been around for over 35 years. (Yes, you read that right, over thirty years, with the first portable computer manufactured in 1979.) And touch-screens have been around almost as long (with the first commercial touchscreen computer released back in 1983). Apple just took the technology to the next generation, while making sure it was easier to use than all of its competitors products. And as for virtual Pokemon tracking, let us remind you geo-location technology has been around for civilian use since the 1980s.

The cloud? Well, I hate to burst your bubble (actually, not true, I love to burst that bubble), but the cloud is just a return to the fundamental concept of mainframe computing with dumb terminals — one big shared computer that services a whole bunch of users who are remote and don’t want, or need, to know how the big computer works. Except this time the big computer is a whole bunch of smaller computers networked together and, since the network is very big (and, in fact, global), the computers can reside anywhere. I could go on, but, even in computing theory, almost everything traces back twenty to thirty five years (or more).

I’m almost ready to agree with the author of a recent Forbes opinion article on the New York Times article that asked why did big ideas die when he said that we live in a post-idea society where people don’t think at all. With exceptions fewer and further between by the day, most people don’t think [deep] anymore.

Why is this? As Gabler says, we are living in an increasingly post-idea world — a world in which big, thought-provoking ideas that can’t instantly be monetized are of so little intrinsic value that fewer people are generating them and fewer outlets are disseminating them.

Who’s to blame? Gabler blames the usual suspects — the web, Twitter, and everything else that, instead of facilitating a lively intellectual life, instead drowns us in information. And while some of these suspects, like Twitter, are indeed a problem, the reality is that they are a symptom and not the root cause. (Even though it was demonstrated back in 2010 that excessive use of Twitter and similar real-time communication platforms makes you dumber than a Pothead.)

The problem lies with Wall Street and VCs. They’ve convinced the business world that nothing matters beyond the current quarter and any idea that can’t be brought to market overnight isn’t worth it. We did not come further in the last 100 years than in all of human history by only focussing on products that could get to market quickly. (We have to remember that the first cross-Atlantic transmission did not occur until 1902. This transmission, and all major computational and communication advances since, did not happen in a quarter. Most of the advancements took years of research and decades to perfect.) If you’re trying to change a market — to go from a Model-T to a Jaguar — that takes years, but VCs won’t support anything that can’t be done in more than a few months. As a result all we get are small incremental improvements, with significantly diminishing returns as time goes on, as no one is investing to take the big leap forward.

And, despite claims to the contrary, we haven’t really reinvented the organization (as telecommuting and outsourcing have been common for at least a couple of decades), education, health care, or ownership. We’ve simply redefined management and, in some cases, who foots the bill. I’d like to see some fundamentally new big ideas, but unless someone from a parallel universe where they invented time travel finds away to break into this one and give me a time travel machine to go back in time, I may not live to see that day.

Millions Saved. Pennies Spent. Why Won’t They Learn?

Trade Extensions recently released a new set of case studies chronicling just half a dozen sourcing projects it did over the last couple of years for its fortune 500 clients that chronicled, on average, savings of 10% or more which ranged from 500K on a 5.5M category to 28M on a 200M category. All of these companies saved tens of millions (or more) and only spent in the six figure range for the Trade Extensions solution, which means for every penny it saved a dollar.

It is not just the magnitude of the savings that is significant though – it is the breadth of the impact. The air freight example not only identified a savings potential of 42%, with a realized savings of 21% (when the company took risk, performance, and preferred vendors into account), but also identified a scenario which improved service levels and reduced risks while delivering 21% savings.

The compliance reporting example helped an organization that, due to the scale of it’s operations, took five days to analyze the output of its Transportation Management System (TMS), reduce its retrospective analysis time to a proactive operations step that automatically executed in 30 minutes or less, and allowed the organization to, for the first time, ensure its product movements were consistent with the awarded contract scenario.

In the full truck load and global packaging examples, the companies were able to rationalize the supply bases by 25% to 40% while reducing cost and at least maintaining service levels and risk (if not increasing service and decreasing risk).

But yet these examples are rare. Every year many organizations as large, or larger, than these continue to spend close to, if not, seven figures on their first generation sourcing or source to pay platforms while generating savings that, instead of being in the 10% or more range, are in the 2% to 3% range, which means that the organization is essentially spending dollars to save dollars — which does not make good ecnoomic sense. Especially when a modern optimization (backed sourcing) platform can always be run along side existing supply management system and used as appropriate to generate 3X to 5X the savings and value than the organization would otherwise obtain.

So while the leaders have learned, why won’t the laggards learn?