Category Archives: Technology

How Much Does That Enterprise Supply Management Solution Really Cost, Part I?

Pardon my language, but GFQ: Good Fracking Question! With the way that most providers price these days, it’s really hard to tell and bravo! to Chain Link Research (CLR) for taking up the issue in a recent 2-part piece on SaaS Pricing: Insanity or Good Deal for Users (Part One and Part Two). When I first broached the subject back in 2009 in my series on An Enterprise Software Buying Guide (Part I: Overview, Part II: Cross Functional Team Formation, Part III: Need Identification, Part IV: Potential Solution Identification, Part V: Cost Model Definition, Part VI: Cost Model Calculations, Part VII: Negotiations and Part VII: Contract Definition & Management), I thought I was the lone crazy voice talking to the cat in the corner that wouldn’t listen because, at the time, everyone thought SaaS was always cheaper and the wave of the future. (Sometimes it is, sometimes it isn’t.) The reality is that up-front license cost or annual subscription fee is only one part of the puzzle, and until the full puzzle is understood, it’s hard to figure out what the true cost is and, ultimately, what’s the right solution for the organization.

As the CLR articles point out, the first thing you have to figure out is what you’re buying. Is it on-premise, hosted ASP, or SaaS/Cloud, and then, more importantly with respect to today’s cost models, is it enterprise or community? I.E. Is it 100% internal to your organization or does it allow you to connect with different organizations within the extended enterprise as well as supply chain partners? Is the price fixed, per usage metric, or based on Spend Under Management (SUM)? If your organization only has 20% SUM today but is buying the solution to get to 80% spend under management, then the cost of the solution is going to quadruple overtime. What sort of user connectivity is supported? Is it in-house only? Remote? Multi-location? And, today, multi-device? (Executives want everything, whether it makes sense or not, to work on their iPad and/or iPhone.) How secure is it? And how much hardware and/or how many data centre resources are going to be required to support it?

If it’s on-premise/hosted ASP, is the license perpetual or for a limited term? If it’s SaaS, is it single-tenant or multi-tenant? What sort of availability or security assurances are there? Is anything being outsourced?

And then, once you get a grip on the basic delivery model, you need to start coming to terms on how the solution is being priced. For SaaS, what is the frequency of subscription payments? What is the payment based on — site license, number of seats, number of transactions, CPU utilization, bandwidth utilization, storage requirements, and/or dollar volume processed? And what are the up-front costs? Is there a one time integration or implementation fee? Any customization fees? Any training fees? The list goes on.

Similarly for enterprise. Is the license fee fixed-term or perpetual? Site license, by user, by server, or by CPU? Does it require any middleware that must be licensed separately? What is included in the way of implementation and integration? In terms of user training and, more importantly, site administrator / developer training? How much customization is required? The list goes on.

For an average business user trying to select the best solution for the business, it’s like trying to compare apples to oranges (which can be compared, by the way — see this post) to processed fuel (which is of an entirely different composition and has an entirely different production cost model, unless, of course, it’s corn-based ethanol). But there is hope! Stay tuned for Part II!

Some Takeaways from the E2Open sponsored SCM World Collaborative Execution Study

SCM World recently released a study on “Collaborative Execution” (defined as two or more parties working together to improve supply chain performance by continuously solving real problems with better information), focussed on Speed, Innovation and Profitability, overseen by Kevin O’Marah, and sponsored by E2Open that had some rather interesting, and in a few cases, surprising results. First off:

For suppliers, collaboration is primarily a means by which their customers share demand information, with 73% strongly agreeing this is a key aspect of collaboration.

For buyers, an overwhelming 83% believe collaboration revolves around the supplier sharing availability information (e.g. capacity, lead times, etc.).

In other words, both sides agree that collaboration centres on information sharing and, furthermore, the study also found that,
both sides need visibility and want a dedicated problem solver.

This means that the primary barrier to collaboration between most supply chain partners is the fact that companies struggle to share information effectively, with 54% seeing lack of data visibility across trading partners as a perennial problem. Furthermore, the next biggest barrier was speed of issue resolution, with almost 50% agreeing that this was a barrier to effective collaboration. (In addition, 92% agree that quick problem resolution is part of good collaboration.)

But the most surprising result of the survey was that trust, governance, and benefit sharing were not the biggest barriers to collaboration, as commonly suggested, but the ability to connect trading partner information flow, insure quality of information, and synchronize that information for quick problem solving. (For example, almost one half of respondents felt granularity of data was a problem, speaking to the quality issue, and almost one half of respondents saw timeliness of information as a problem.) This says that, for the most part, it is not lack of desire, trust, or willingness to collaborate that is the problem, but a lack of technology to enable collaboration. (And this is a shame, considering that such technology has existed in more than adequate form for at least five years now for even the largest of multi-nationals with the most complex supply networks. It may take some effort to get used to some of the technology, which is only now maturing on the usability front in some cases, but how much of a barrier is it really to spend a few days learning a technology that is going to cut your issue resolution time in half and decrease your risk substantially?)

Given that:

  • collaborative relationships were more cost effective,
    55% of respondents agree
  • good collaboration minimizes risk, and
    75% of respondents agree
  • learning is faster in a collaborative environment
    70% of respondents conclude that the rate of leaning increases by at least one-and-a-half times

Acquiring the technology that your organization needs to take collaboration with your trading partners to the next level should be a no-brainer. (Especially since the last finding means that any operational metric targeted such as inventory days, total landed cost, cash to cash cycle time can be expected to improve one and a half times as quickly as would be the case without collaborative execution. Thus, any appropriate technology acquisition is going to give you a very quick ROI.)

The only other point of interest was the not-so-surprising result that management by exception it seems is still not part of a “truly collaborative” trading partner relationship for a substantial number of companies. This would indicate that collaboration, even among market leaders, is still not very mature. In a mature relationship, each party trusts the other to do what they do best and only gets involved when a deviation is detected or an idea is devised to improve the process or product. But still, it’s nice to know that both buyers and sellers do not see trust as a barrier to collaborating for mutual gain.

The Top 10 Supply Management Technologies Webinar 2012-04-24

Top 10 Supply Management Technologies
A Foundation For Your Next Level Supply Management Journey
Webinar

 

Tuesday April 24, 2012 from 12:30 PM to 1:30 PM EDT

 

VFS. Hi-Def Sourcing. Next Level Supply Management. Next Practices. Value Chain Creation. The acronyms and acclamations are flying fast and furious. Even world class Supply Management organizations have to do something more to maintain their year-over-year contributions to the bottom line with the perfect Procurement storm of high demand, low supply, and high market volatility brewing off of the coast. But where does an average Supply Management organization begin?  Good question!

In our upcoming webinar on our Top 10 Supply Management Technologies – A Foundation For Your Next Level Supply Management Journey, Michael Lamoureux will attempt to provide an answer.  The short of the situation is that your organization probably needs to begin a next-level supply management journey, and this will require that your organization achieve excellence along the three dimensions of talent, transition, and technology.
In this webinar, we will attempt to get your organization started on the right track by reviewing the top 10 technologies for Next Level Supply Management which will help an average organization find the goldmine of untapped savings opportunities that it fails to realize because it doesn’t even know about the gold-bearing vein running through its enterprise data.  The reality is that, with the right systems in place, the average company can tap cost reduction and savings opportunities that could collectively add up to 30%, or more, of spend across major direct and indirect categories.  And it is these systems, along with a few real world case studies, that will be reviewed in our webinar on Top 10 Supply Management Technologies –  A Foundation For Your Next Level Supply Management Journey!
Registration is limited to 30 attendees.  Please register early to secure your space. 

   
 
Interested in learning more about the technologies that will be discussed? Click here to read Michael Lamoureux’s whitepaper “Top 10 Technologies for Supply Management Savings Today”

Sincerely,
Bridgette Barry
BravoSolution

EQ does not matter more than IQ — Nice to see not everyone is getting caught up in the hype!

EQ, short for Emotional Quotient and also known as EI, short for Emotional Intelligence, and the next resurgent craze in talent management, is very important in Supply Management given the regularity with which supply management professionals need to interact with suppliers and peers around the globe, the number of disruptions that occur on a semi-annual basis, and the intra- and inter-organizational conflicts they will be regularly called in to resolve. After all, people with high EI have more empathy, tend to stay calm under pressure, and have a knack for effectively solving conflict.

But, despite what Daniel Goleman may have claimed back in 1995 (when he authored a book titled Emotional Intelligence: Why it can matter more than IQ), it does not matter more than IQ. As Zoe Lewis, a director at Harvard Lewis, notes in this piece in CPO Agenda on how “clever is no longer enough”, EI must complement IQ. EI and IQ have equal value and it’s equally important for leaders to have a high IQ because in that position they need to be able to make certain decision. You can be the most motivated, empathic, and socially adept individual in the world, but if you don’t understand a balance sheet, ROI, or even the basics of a production line, there is no way you are going to effectively lead a manufacturing organization — or even make any important decision in its day to day management.

In Supply Management, IQ is just as important as it is in senior leadership. In order to be successful today, a Supply Management professional has to be a master of transition and technology — that includes Spend Analysis, Decision Optimization, and Predictive Analytic Demand Planning Solutions. That requires some serious IQ to understand not only how to use the tools, but what patterns to look for, what models to build, and what statistical and interpolative techniques are appropriate for the categories and commodities being sourced. You can be the most emotionally intelligent man, or woman, in the world and be perfect company for Jonathan Goldsmith, but if you don’t understand how to navigate a spend cube, breakdown costs into raw components acceptable to an optimization solution that uses a piecewise linear mixed integer programming model, or understand the difference between statistical interpolation and comparative pattern matching, well, let’s just say that there’s hundreds of thousands in technology purchases and licenses down the drain.

Of course, it is EQ that makes the difference between a good buyer and a great buyer as the dynamics of the position will continue to change much more along the way of relationship management. This is primarily because the need to reduce costs today is as dire as it ever was and traditional methods of working with suppliers and stakeholders only achieve 3% to 4% improvement a year — not the 30% to 40% improvement targets now placed on some buyers. Even spend analysis and decision optimization, the only two technologies in supply management proven to deliver year-over-year returns in the double digits (at 11% and 12% respectively), will not come close to these targets. Only collaborative sourcing techniques that utilize these technologies as part of joint efforts with suppliers to identify opportunities for significant cost reductions (which take major EQ as well as IQ to pull off) have a chance of delivering those returns.

And the good thing about EQ is that, unlike IQ, it can be improved over time. While you generally realize your IQ potential early on in your life, with effort, your EQ can keep increasing. Even if you start of with no social skills and are outcast like a Napoleon Dynamite, if your IQ is smart enough, you can still become a James Bond, or at least an Alastair Donald, who is a secret agent of business improvement. Once you develop self awareness, self-regulation, social skills, and eventually empathy can follow if your motivation, and patience, is strong enough. You can take self-assessments, courses, or get a mentor. It may not happen over night, but you can get there.

And you can get there faster if your organization makes the move from a training organization, where lessons are forgotten as soon as the next fad is brought in by senior management, to a learning organization where best-in-class methodologies, that are really only best-in-class for your competitor, are not force-fed from the top but developed bottom-up by motivated, engaged employees who want to make the organization a better place to work and share what they learn. That’s the foundation for true EQ in an organization.

Has the Best been Bought from Best Buy?

StorefrontBacktalk recently ran a couple of pieces on Best Buy that followed up their recent pieces on “Best Buy’s Black Friday Fiasco” and “Best Buy’s Wifi Porn”, which was expanded upon by SI in its recent posts on how if you wanted a best buy experience, you weren’t going to get it at Best Buy (Part I and Part II). In its first piece on “Best Buy’s Last Hope”, the author says that Best Buy has one shot — an expensive, painful, highly disruptive shot — to truly turn itself around. It must embrace customer service in-sore to an extent that would make Nordstrom, Trader Joe’s and Whole Foods blush. That means store associates who are true experts in the electronics they are selling.

Frankly, I don’t think this is going to happen. The mentality would have to change from “who will work for us for minimum wage and pretend they know enough about this product to actually sell it” to “where can we find someone who knows what they are talking about, is passionate about the products they sell, and will actually work for us as a sales rep” and “what is it going to take to get that kind of people”. Right now, the type of service I’m used to is “this isn’t my department, you’ll have to find someone that is working in this department” to queries as simple as “can you tell me if you still have any of this product in stock” (which any associate can do simply by logging into one of their terminals and doing a query) or, my favourite, in response to “I’d like that” (pointing to something in a cage). Get the key, open the damn cage, give it to me and/or walk it to the cashier. An untrained monkey could do it! (And monkeys are smarter than you think. Pete the Monkey taught himself to do dishes.)

Plus, as the author notes, they would probably have to fire most of their staff and replace them with Apple-store caliber employees. And any employee of that caliber is probably going to go work for Apple or, if they prefer Windows, Sony where knowledgeable associates are preferred.

After all, as the author notes, they currently think they can win a price war with Amazon. A company with massively deep pockets, minimal physical overhead (compared to a retail store chain), and a willingness to go eight years without turning a profit just to conquer a market. Winning a price war against Amazon in the electronics space is not going to happen. Amazon can, and will, win on margin every time if that’s what it takes to be the next major electronics retailer and put Best Buy and its competitors out of business. (And it won’t be hard when it’s customer service reps often give better service over the phone than Best Buy associates in store!)

The other piece that got my attention was that “Best Buy Planned Outages Due to Its Move to the Cloud”. If you believe the hype (and the doctor does not), the whole point of moving to the cloud is so that you don’t have outages. But the most ironic aspect to this story is that Best Buy is cutting Amazon a check for its cloud efforts. They might as well just sell to Amazon.com now and become Amazon’s mobile presence. One little glitch and a propagated purge command and — voila! — no more Best Buy online. (Not that it would make a huge difference anyway. What good is a web store that a growing portion of your market can only order one item from at a time anyway? [See Best Buy Experience? Not at Best Buy! Part II.] the doctor is now ordering more electronics from the local office supply depot because their web site actually works! And if you send them an e-mail, customer support actually responds! On the other hand, it seems that Best Buy’s method of dealing with problems is just to ignore them. It’s not a problem if you don’t recognize it, right?)

The nostalgic part of me would like to say that Best Buy still has a Bright Future, but, in the doctor‘s view, the only chance of Best Buy lighting up the sky is if the same thing happens to it as happened to the Buy More in the season three finale of Chuck. The way things are going, it’s going to be closing 50 stores (CNN Money, March 29, 2012) on a regular basis. And I don’t think China’s going to save it. If Best Buy truly takes off in China, there’ll likely be so many indistinguishable clones in three months that it will just be hastening its demise.