Category Archives: Supply Chain

SourceMap: Striving to Bring Supply Chain Visibility to the Masses

SourceMap is a supply chain mapping tool that is designed to help an organization map out their end-to-end supply chain to help them gain critical insight and understanding into their performance, costs, sustainability, and risk. Especially risk. Most companies don’t understand the risks hidden in their supply chain — the sole-source parts, the over-dependence on high-risk geographic areas, or the ability of a single port strike to knock out multiple shipping lanes. (Nor do most companies understand the cost of risk, which is discussed in detail in Sourcing Innovation’s upcoming white-paper on Playing With Fire, but that’s a discussion for another post.)

SourceMap, born as a research project at the MIT Media Lab to publish and measure the environmental footprint of all the products on earth, was launched as a public platform for supply chain mapping in 2009 that allowed individuals to see every aspect of a product’s life — the good and the bad. Then, in 2011 it partnered with the MIT Centre for Transportation and Logistics to pursue opportunities in automating supply chain visualization and risk management. Shortly after, the 2011 Tohuku tsunami hit and wiped out over 45,000 buildings, damaged over 144,000 more, shut down all of Japan’s ports (including 15 that were located in the disaster zone). All told, it did over $300 Billion in damages and sent shockwaves throughout global supply chains. Companies were scrambling to understand the impact on their supply chains, SourceMap was approached, an incorporation followed, and the private sector solution was born.

Hands-down, SourceMap is the best visualization of the supply chain to hit the scene since Resilinc, which is, in Sourcing Innovation’s view, is still the leader in Supply Chain Risk Management solutions, but if all an organization needs is visibility and Supply Chain Visualization, SourceMap is now a leading contender in that arena. SourceMap has the ability to use an organization’s ERP data, public data sources, and survey data from the organization’s suppliers, the suppliers’ suppliers, down to the raw material suppliers, to create a complete point-to-point map of the supply chain that an organization can use to trace it’s products from source-to-sink on a (Google Earth) Map and visually see what is happening. This is a very powerful feature that allows an organization to gain insights into their supply chain that they never knew before. And just like an organization is typically shocked the first time they run a spend analysis (we spend that much with who?!?), they are typically just as shocked when they run a map and see that a number of distributors and tier 1 suppliers are using, or outsourcing a significant portion of, spend to the same tier 2 supplier and just pushing the single-source point of failure an organization is trying to avoid one step further down into the Supply Chain.

And the SourceMap solution, which only needs common location data points, can quickly import and combine all data sources an organization can get its hands on and SourceOne can often create a starting supply chain map for an organization in less than an hour. It’s not complete or perfect, but it allows the organization to quickly drill into the supply chain and see where the data, and focus, is needed.

SourceMap is quickly becoming the new supply chain visibility solution to watch, and for a real in-depth analysis, Sourcing Innovation would recommend the in-depth write-up that the doctor and the prophet collaborated on over on Spend Matters Pro (membership required) that provides four pages of deep insight into the solution.

Two Hundred Years Ago Today …

… saw the first successful test of a Davy Lamp, a safety lamp for use in flammable atmospheres that consists of a wick lamp with the flame enclosed inside a mesh screen that acts as a flame arrestor. The idea is that air (and firedamp) can pass through the mesh freely enough to support combustion, but the holes are too fine to allow a flame to propagate through them and ignite any firedamp (like methane) outside of the lamp.

While this lamp, designed to decrease accidents by preventing explosions that would maim or kill miners when there was an abundance of methane or other combustible gasses, actually increased mine accidents (as miners believed it was now safe to work in parts of the mine that had previously been closed for safety reasons), successors did eventually increase mine safety and allow mines to be worked more safely (when the lamps, such as the Protector Garforth GR6S flame safety lamp, are properly used).

When the lamp was first released, miners believed they could work in sections of the mine that had unsafe levels of methane because the lamp would not ignite the methane. This was true only insofar as the lamp was not damaged, but, in the original design, the bare gauze was easily damaged and the lamp became unsafe as soon as a single wire broke or rusted. Plus, because the mine owners thought the safety lamps were enough, they did not install proper ventilation to keep methane levels down (which would have prevented methane explosions from slightly damaged lamps).

But, eventually, legal requirements for legal air quality and safety lamp improvements made mining safe, and the raw materials we all depend upon to create our products became easier to mine and supply became more predictable. While the Davy Lamp may have been a bump in the road, it was an important invention on the road to modern mining.

Provider Damnation 66: Tier 1 Suppliers

Suppliers. Some days you can’t deal with them but you cannot survive without them. You’re in business to serve customers, who want the products your organization sells, but which your organization can only provide if your tier 1 suppliers manufacture those products you need, to the customer’s specifications. And that’s the kicker.

No suppliers, no products.

You absolutely need suppliers, even if you are a pure services agency because you still need products (be it laptops, janitorial suppliers, or even paper for reports) to deliver services. There is no such thing as a fully integrated self-sustaining business that is self-contained all the way back to the mining or harvesting of the raw materials, the production of the energy required to process them, the pumping of the water required, and so on. So you need suppliers. Lots of them. Sometimes thousands of them. And trying to manage that many suppliers, even with a best of breed SRM system, is a nightmare on a daily basis, because, if things go wrong

Once you have a contract, barring catastrophic supplier failure, you’re locked in.

A contract locks you in until an exit clause is hit, which, in an average contract in an average organization, typically is only invokeable when a supplier fails to deliver a significant portion of the contracted goods after a significant amount of time has passed (and your organization has been stocked out for weeks and lost millions of dollars), the quality gets abysmal and the warranty return rate hits the double digits, they violate a federal safety or import regulation, or they commit a crime — assuming you have a well drafted contract.

This means that, if they’re always a few weeks late, running up costs with unnecessary expedited shipments, tacking on fuel surcharges, or slacking on quality and continually shipping orders with DOA rates just within limits, there’s nothing you can do about it. You can employ the best SRM techniques up your sleeve, but if they refuse to respond, until the contract is fulfilled and you can kick them to the curb, they’re your problem because your customers are yours to satisfy, not your supplier. Moreover, if you can’t break the contract, you can’t even shift demand to another supplier temporarily until a force majeure event occurs when they are allowed to claim inability to fulfill you orders until the event is over but

When force majeure hits, you may not be able to respond fast enough.

If it’s a custom product, it’s impossible to just go back to the runner-up in the sourcing event, award them a short-term contract (with the promise of an extension in the future when you kick your current supplier to the curb), and expect them to start production the next day. Even if, after being turned away, they say yes, and even if they say yes quickly, and even if they have capacity opening up, it takes time to retool a production line and get the engineers up to speed on a new product design. It’s going to be weeks, at the minimum, before you see the first unit.

But if you don’t find a temporary supplier, your solvency is in danger.

Cash-flow is the life-blood of the business, and without a product, it’s no sale, and no sale, no store. A company that does not sell does not survive long.

A poor supplier that locked you in to a three-year contract before you found out that they were a poor supplier (that just marginally met the minimums necessary to prevent you from cancelling the contract without a huge penalty that the organization is not likely able to afford) is a damnation of the worst kind. Fortunately there aren’t many suppliers like this because even one is way too many.

Seventy Three Years Ago Today

The space race begins with the launch of a V2/A4-rocket from Test Stand VII at Peenemunde, Germany which becomes the first man-made object to reach space.

Less than nineteen years later, Yuri Gagarin became the first man in space when he orbited the earth on 12 April 1961 in a Soviet Vostok spacecraft.

And a mere eight years later, unless conspiracy theorists are to be believed, the United States put the first man on the moon on 20 July 1969.

Less than two years after that, the Soviet Union launched the first space station, Salyut, and public-sector extra-planetary supply management began.

Speaking of the space race, the Space Shuttle Atlantis made its maiden flight thirty years ago today on 3 October 1985, forty two years after the space race began. Atlantis, the fourth operational space shuttle, flew thirty-three missions and orbited the earth a total of 4,848 times, travelling a distance that was more than 525 times the distance from the Earth to the Moon. Notable missions were it’s 4th, which deployed the Magellan probe bound for Venus, its 5th, which deployed the Galileo probe bound for Jupiter, its 14th, which represented the 100th US manned mission and the first shuttle docking with Mir, its 21st, which was its first docking with the International Space Station (ISS), and its 30th, which was the final Hubble Space Telescope Servicing Mission.

And eleven years ago, less a day, on 4 October 2004, SpaceShipOne won the $10 Million Ansari XPrize when it became the first-even private vehicle to carry a human being into space.

And this year, Space Exploration Techologies, SapceX, became the first company to ship private cargo to the ISS using its own rocket and ship, the Dragon.

And Virgin Galactic is working on a new SpaceShipTwo that could be ready to take commercial passengers into space as early as next year.

It won’t be long before someone puts up a private space station, and private sector extra-planetary supply management becomes a reality. (And when it does, and you need someone to optimize those supply models, you know who to call.)

Is Your SRM Program Leaving Hundreds of Millions on the Table?

With external spend in an average company between 60% and 80%, a considerable amount of an organization’s value is dependent upon its supply base. Quality, reliability, and attractiveness are all dependent upon the supplier’s ability to create a quality product for your supply base. Service, repair, and timely customer interactions related to such all rely on the suppliers ability to deliver quality service and quality, timely, communication.

Moreover, the average organization is not only relying on its suppliers to create its value, but is losing out on hundreds of millions of dollars of value due to inefficient, and sometimes ineffective, supplier relationship management. For example, a recent study by Vantage Partners found that the top ten performers in SRM reported an average of $298 Million in financial benefits from SRM in 2014. That’s a lot of cash. As summarized in this article titled “unlocking potential value srm through effective governance” over on My Purchasing Center, there is a lot of value to be had by investing in better supplier governance.

For example, companies with good supplier relationships have suppliers who alert them to potential issues or potentially late deliveries at the earliest sign of trouble and jointly work with them to identify a resolution. But this is just the tip of the value iceberg. Joint cost reduction initiatives. Joint innovation. And so on.

But how do you get there? According to the article, the starting points are

  • supply base segmentation
  • policies and procedures
  • alignment with sourcing, category, and contract management
  • (designated) executive sponsors
  • (designated) relationship managers
  • strategic business plans

which is true, but this only addresses three of the six pillars of SRM, namely

  • stakeholder engagement & support
  • governance & process
  • business driver and value

but doesn’t really address the other three pillars of SRM,

  • people and skills – talent matters
  • information and technologies – platforms enable process
  • relationship development and culture – management is just the start

But, fortunately, there’s still time to get a handle on all of this and, more importantly, find out where your organization stacks up with respect to its peers as you still have one week to participate in the 2015 SRM Survey by State of Flux. Taking this survey, which is the most extensive survey out there on SRM, will not only give you first look into the survey results, but also give you first access to what has become the largest, most in-depth, SRM report on the planet. The 2014 SRM Survey Report clocked in at 216 pages of data, results, and expert interpretation and was full of valuable, actionable, insights — including the pillars and the ten essential starting points, not six — that your organization can use to launch an SRM program — and it’s free to all survey participants as well! Moreover, you’ll also get the full 2015 Report as soon as its available – and this will be invaluable as it will be the first report focussing on what a Supply Management organization can do to gain the executive sponsorship and support it needs for success, and the first report written with the C-Suite in mind. You will be able to use it in your quest for purchasing fire.

So don’t delay and take the 2015 SRM Survey today, before it’s too late!