Category Archives: Sourcing Innovation

45 Million People Are Blind today!! Cheesecake Factory Might Be the Answer? (Part 2 of 2)


Today’s guest post is from Dalip Raheja, past contributor to Sourcing Innovation and CEO of The Mpower Group, Inc.

Would You Go to McDonald’s for Surgery? What if I Added the Happy Meal Toys?

Atul Gawande just wrote a piece in The New Yorker in which he applies The Cheesecake Factory (TCF – restaurant chain) model to the healthcare system. He cites soaring costs, mediocre service, unreliable quality and significant variability in outcomes/results as the dominant attributes of the current medical system in the USA. Sounds like the typical Supply Chain/Sourcing issues that almost all of us are trying to deal with on a daily basis.

Why did Atul choose The Cheesecake Factory as a model? Because they are a chain with 160 restaurants with 308 dinner items and 124 beverage choices serving more than 80 million people a year. And they manage to do it with very high quality, every entre cooked fresh, reasonable prices, etc. etc. Oh by the way, they put out a new menu every 6 months! I will let you read why TCF is highly successful but mostly it’s all the stuff that you and I are so used to dealing with in our professional lives. Size gives them buying leverage, centralized common functions, demand forecasting integrated with inventory management, etc. etc. They aim for no more than 2.5% waste in an industry where the shelf life is very short. (Editor’s note — this is only 6.25% of the average food waste in America! See yesterday’s post … )

In addition, there are some things about TCF that are quite intriguing. They’ve laid out their kitchen like a manufacturing production line. They have a very good POS system integrated with their kitchen to track “manufacturing” and “delivery” times. They make sure that their staff is well trained and provided with all the tools necessary. They have a well-defined oversight process that provides positive and negative feedback at the end of the manufacturing line.

An immediate challenge is that doctors have been historically paid for effort, and not results. While Hammurabi dictated that a surgeon’s hand be cut off if the patient died, we have apparently moved away from that as I don’t see too many one handed surgeons out there. Healthcare reform is now starting to link compensation to outcomes. Standardization has long been looked at very suspiciously by the medical community.

Gawande discusses an attempt at standardizing knee replacement and how it impacted his mother’s surgery — reducing recovery time in the hospital by more than half and reducing rehabilitation time by 3/4ths! And did I mention all at lower costs and better outcomes? The doctor has gathered best practices and then standardized them — an unheard of phenomenon. All the way from anesthesia to rehabilitation, including cutting down on the number of options for prostheses surgeons could order. It is a fascinating must read for ALL supply chain/sourcing people as it reads like a classical case study.

The challenges that Gawande lays out for the medical community are very significant. The first and biggest challenge is the incredible amount of time it takes for this profession to adopt (AEIOU) new ideas — decades for new protocols and guidelines to be adopted. This should come as no surprise to readers of the doctor‘s blog and our numerous discussions on this topic. Competency Development in the medical community is still not focused appropriately — “In medicine, we hardly ever think about how to implement what we’ve learned“. An example he cites is Dr. Armin Ernst who is essentially the Chief Adoption Officer. Ernst does not deal with patients — but works with the doctors at their 10 ICUs in ensuring that best practices are being adopted. He provides the same kind of oversight that was found at TCF. Do you have a Chief Adoption Officer?

The transformation in the health care sector is underway and it will borrow heavily from our profession. Supply Chain/Sourcing can and will contribute significantly. As Dr. Gawande points out, “We’ve let healthcare systems provide us with the equivalent of greasy spoon fare at four-star prices, and the results have been ruinous. The Cheesecake Factory model represents our best prospect for change“.

Thanks, Dalip.

Best Practice Vendor Selection for True Multi-Nationals Part V: Stuck with an ERP? You do have options!

Despite claims to the contrary, you are not stuck being a sap or hearing prophecies from an ethylene-gas inhaling delphi. You do have options. Acquisitions might have some analysts in a tizzy, but you only need to remember one thing. Don’t Panic.

Ariba & Emptoris were not the only best-of-breed game in town
You still have options, and these options are on both sides of the Atlantic.

Best of Breed vendors eat, sleep, and drink procurement
Unlike do-it-all or ERP vendors, best-of-breed procurement vendors are focused entirely on procurement and, as a result, they tend to be much better at it than do-it-all or ERP vendors, especially supplier enablement, which we all know fuels the e-procurement benefits engine.

Best of Breed on an ERP backbone can offer significant advantages

  • Best of Breed providers often know the ERP systems better than the consulting implementation partners, who care more about weaseling their way into long-term strategy consulting than a successful implementation. (For example, there are a couple of vendors with over 100 customer SAP implementations, who know the system way better than a Big 5 consultant on his second implementation.)
  • Best of Breed providers have enabled hundred of thousand of suppliers, maybe more, over the years … in all regions of the world … your 347 suppliers aren’t going to make them flinch (and it’ll be faster and cost less, because once again, they’ve been there, done that … a few hundred thousand times.)
  • Best of Breed provider’s customers are all former ERP e-procurement / consulting implementation customers … that’s right, most of whom have already failed using the ERP/consultant approach, spent the millions, got 7 punchouts and 11 catalogs implemented … now they spend thousands and get … well, you already know … actual results and benefits.
  • Best of Breed providers have to be better than the ERP or broad portfolio providers, because they can’t fall back on their CRM sales or app server license revenue if they don’t deliver.
  • And because of all of this, Best of Breed providers have way more references than the ERP providers. Those big ERP guys based in Germany have two significant e-procurement references … one they’ve been using for 3 years, and another from a company I never heard of on this side of the Atlantic … I know of one Best of Breed provider who has 19 published case studies, and has only lost one customer in 14 years, and that was after this company was a customer for 9 years, and decided to outsource IT, and the outsourcer, IBM brought in an ERP to replace all of the internal systems.
  • Best of Breed providers’ SaaS-type offerings and supplier networks eliminate the need for your IT department or external consultants to be involved, so they implement faster and less expensively
  • The most successful Best of Breed providers have service organizations around the globe to assist with implementations and provide stability.
  • Best of Breed providers fill in the gaps where ERP fall short. ERP may try, but it is not all-in-one and they are usually a year or more behind the Best-of-Breeds functionality-wise.
  • Best of Breed works and they have the client stories to prove it. Follow SI’s advice and check their references.
  • Best of Breed will help your SUM (Spend Under Management) soar.

Consider your options carefully. A Best of Breed solution on your ERP backbone might be the best decision you can make.

45 Million People Are Blind today!! Cheesecake Factory Might Be the Answer? (Part 1 of 2)


Today’s guest post is from Dalip Raheja, past contributor to Sourcing Innovation and CEO of The Mpower Group, Inc.

45 Million People Are Blind today … and 80% of them could be cured through surgery (36 million if you’re looking for your calculator). Oh, of course, most of these people cannot afford the surgery, don’t know about it, cannot physically be where eye care is available, and so on and so on. The answer? Reverse Innovation (RI) — a term coined by Jeffrey Immelt and Vijay Govindarajan. The basic premise of RI is that all innovation cannot flow from the developed to the developing world. There is a lot of innovation going on in the developing world that can and should be adopted here. According to Govindarajan, one can and should argue that the paradigm in the developed world is “spend more to come up with innovation,” while in the developing world the exact opposite is true, “spend less to come up with innovation.”

Let’s look at some comparative facts first:

India US
Aravind surgeries 2,000 a year 125 a year
Average Cost $30 $1,000
Complications 1 / 2 Double

So, what’s the secret? It must be that they are performing a procedure that is not even accepted in the developed world. Not true. What they perform is called Phacoemulsification (considered the gold standard in cataract surgery).

What they have done is reimagined (not just reengineered) the entire conceptual framework with a different set of assumptions and come up with some innovations that are staggering. They have created an assembly line mentality that allows surgeons to focus on what they do best — perform the actual surgery. Not the prep, not the paperwork, not anything else but that which leverages their specialized skill set the most … allowing a surgeon to do 30 to 40 surgeries a day!! There is no time wasted between surgeries — the next patient is prepped, draped, and ready to go. With no degradation of quality! Oh by the way, Aravind performs about 300,000 of these procedures a year … WITH HALF OF THEM FREE!

Because they are offering the latest procedures with exceptional quality, half of their patients pay them full going market rates which then subsidizes the charity cases, which is what they are really about. They have used the combined volume leverage and scale to start making their own intraocular lenses and providing some lenses for $2, and they are now exporting these lenses to 120 other countries (Canada, Denmark, and Israel amongst them).

If all of this sounds like a classical supply chain/sourcing problem being solved — that’s because it is. They have applied a number of ideas from the business world to the non-profit world. So much so that they have also reimagined the traditional model of a charity organization always looking for a handout — they’ve planned half of their effort to be a commercial venture generating profits to pay for charity.

This is but one example amongst many:

  • GE’s portable EKG machine — developed in China
  • Boston’s PACT program — modeled after a program in Haiti
  • Kangaroo care — developed in Colombia
  • Pedialyte — developed in Bangladesh

And one of the biggest stories is Dr. Therdchai Jivacate (Thailand) who is providing artificial legs made out of plastic yogurt bottles for about $100 with a delivery time of 1-3 days compared to $10,000 and 7-10 days! Dude — don’t throw away that water bottle! And to lower the cost of labor involved in actually working with patients, he has trained local recipients of the artificial legs. He just broke the Guinness Book of World Records by serving 864 amputees in 13 days.

So before you pooh pooh those ideas from your colleagues from the developing world, you may want to keep an open mind and process them. You may want to actively seek innovations from your suppliers in the developing world. Remember — their context is different and context is very powerful and they are able to reimagine problems that we cannot because we cannot shake out of our context.

In the next post, we will continue this conversation about innovation and examine Atul Gawande’s suggestion of using the Cheesecake Factory (a place I’ve never been to) model to reimagine the healthcare system.

Best Practice Technology Vendor Selection for True Multi-Nationals Part IV: Open the Doors for a Truly Successful RFX

In the first three parts (I, II, and III) of this series we discussed the proper RFX process to follow when attempting to select a technology(-based) solution provider (for e-Procurement and e-Sourcing in particular) as a true multi-national. We noted that while most companies more-or-less understand the high level process, most get the implementation wrong, focussing too heavy on feature-function checklists (that are usually put together by vendors, even if they are obtained from third parties) and too little on a vendor’s global implementation and support capabilities.

If your organization follows the advice presented, starts with the customer references, and only spends time and energy reviewing those vendors with a track record that suggests that the vendor could meet your global implementation and support needs, then your organization is off to a great start. But this isn’t the only best practice that your organization should be following in the selection of a vendor for your global technology needs. In this post we’ll cover five more.

The Core Solution Litmus Test
Once the vendor has passed the customer litmus test, the next litmus test is the core solution requirement litmus test. After dividing all of the stakeholder problems into must solves, should solves, and nice-to-solves, make sure that the vendor has solutions (technology, services, or a combination thereof) that address each of the must-solve problems and most of the nice-to-solve problems. The vendor is not right for you unless it is a global, cultural fit that brings the right solutions. (There’s no checking of feature/function boxes at this step.)

Third-Party Claim Verification
Most vendors will make big claims in terms of their platform capabilities. Just like a vendor’s ability to serve your organization globally should be challenged and verified with customer references, so should its ability to fill your technology gaps. Not only should you talk to their partners, but talk to analysts, bloggers, and other third-parties they have interacted with and whom have seen (part of) their solution.

Open Book Negotiations
In addition to third-party claim verification, don’t be afraid to force a vendor to prove every claim, statement, and assumption. This should not stop at current, successful, customer references. The vendor should let you speak to analysts it has relationships with, consultants who have implemented their solutions, auditors to verify their financial stability, and even ex-customers if asked.

End-To-End Total Cost of Ownership Elucidation
What is the true cost of the solution to your organization AND your supply chain? This goes beyond the end-to-end platform cost, as discussed in this classic post on Cost Model Calculations in SI’s Enterprise Software Buying Guide series, but also includes any costs that will be borne by your supply base. It’s often the case with e-Sourcing/e-Procurement solutions with Supplier Information Management, Supplier Portal, or Supplier Network functionality that a vendor will charge your suppliers an access fee. An access fee that is just going to hit your organization with interest in a year when your suppliers raise their prices to cover the fees you caused them to incur. In Procurement, a penny saved today at your supplier’s expense often translates into a quarter spent tomorrow. (And if you don’t believe me, then you need to work on understanding the cost of capital throughout your supply chain. Remember that sound, conventional financial management is NOT good for supply chains.)

Open Finals*
Typically, the final negotiations in this space are more secret than what goes on beyond closed doors at Area 51, scientology headquarters, and the backroom of the club where Wall Street mega deals really happen. This is dumb. Blind auctions may be okay when buying commodities, but it’s the last thing an organization should do when buying a critical piece of functionality where a failed implementation will cost (tens of) millions or more. Not only should each vendor be aware of whom it is up against, but vendors should be asked to promote their strengths and counter their opponents weaknesses. They should be instructed to tell the truth, even when asked tough questions (about customer retention and defection to a competitor), and penalized for false answers. Remember, good vendors are honest, especially about the occasional (big) mistake that they made, learned from, and put measures in place to prevent ever repeating it.

If your organization implements the best practices covered in this series, then chances are, it will have no choice but to prepare for success!

In order to get you started, if you are a multi-national looking to roll-out an e-Procurement solution in a multiple countries and languages, want a single solution provider with a global presence that can manage all aspects of the solution implementation including integration to the back-end ERP and supplier on-boarding and support, and has a proven track record of delivering globally, your short list should probably include: Wallmedien, Hubwoo, and Capgemini/IBX. If you are looking for e-Sourcing, your short list should probably include BravoSolution, GEP (Global eProcure), and growing up-start iValua.

* Nothing to do with tennis, folks!

Best Practice Technology Vendor Selection for True Multi-Nationals Part III: RFX – You’re Missing the Most Important Point!

In this post we continue our series on best-practice vendor selection for your enterprise e-Procurement and e-Sourcing solution. As per Part I, this series specifically relates to the selection of technology(-based) vendors for your enterprise software needs, and e-Procurement and e-Sourcing solutions in particular (as reiterated in Part II).


What is the ultimate goal of your organization’s technology acquisition project? To get an e-Procurement/e-Sourcing system? No. To increase efficiency / save money / get more spend under management? No. To get satisfaction? No.

The ultimate goal is your organization’s success. That’s the only metric you care about when initiating the technology acquisition project (TAP) dance . And if your organization is a global multi-national, then your organization’s success depends on the vendor’s ability to deliver globally. Not how many boxes the vendor can check on some random feature / function check list. Because, as we discussed in our last post, where large-scale roll-outs are concerned, there are only a few standalone best-of-breed sourcing and procurement technology vendors that will make the shortlist for a given organization.

One thing that your organization needs to be aware of is that this is not 2002, this is 2012 and both e-Sourcing and e-Procurement functionality is more-or-less commoditized among the established vendors. Sure, some will have features G, H, and I while others have features J, K, and L, but they all have critical features A through F. And as for features G through L, if they are valuable, the other vendors will catch-up, and the time it will take them is usually less than six months nowadays, and if a feature is made a contingency of a deal, the catch-up time is probably shorter still!

Another thing your organization needs to be aware of is that starting with a short-list of vendors that it is fairly certain can meet its needs will not only significantly reduce the length of the evaluation process (as it is no longer a question of “can the vendor meet my needs” but a question of “is this the best vendor to meet my needs”), but also significantly reduce the organization’s risk. If the organization needs to operate in forty countries and twenty languages, and doesn’t do it’s homework, it could end up wasting six months evaluating three vendors who don’t have a reference outside of the US and UK and who don’t support customers in a language other than English. If it has a deadline of nine months, what does it do? Either it takes the last vendor in the pipeline, if any are left, or rushes out to find another one, with no time to consider how appropriate the vendor it is for its needs or its organizational culture.

Which is another point that is often missed in the traditional implementation of an RFX cycle. Cultural considerations are typically ignored in technology selection, ignoring the fact that people have to use these systems — people who work, think, act, and like to conduct business in a certain way (and like to interact in a certain way with technology and technology / service providers). As a result, good technology selection is not just a matter of check-the-box when a strong vendor interaction is required. If two or more vendors are more-or-less equal from a functional/process selection, the tie-breaker should be cultural alignment. Does the vendor have the same goals? Work to the same metrics? Conduct itself in a similar manner? Give your customers and suppliers the same respect? These are important, but often overlooked, questions. Don’t forget them.

In our next post we will dive into more best-practices to truly take your technology acquisition project to the next level now that your RFX process is back on the rails.