Category Archives: Technology

Yes, Austin, Dashboards are Dangerous and Dysfunctional!

Given my long-time stance that dashboards are dangerous and dysfunctional, I was absolutely thrilled by this recent article in Intelligent Enterprise on how “metrics can lead in the wrong direction” which quoted Robert D. Austin, author of Measuring and Managing Performance in Organizations who said:

“Kaplan and Norton’s cockpit analogy would be accurate if it included a multitude of tiny gremlins controlling wing flaps, fuel flow, and so on of a plane being buffeted by winds and generally struggling against nature, but with the gremlins always controlling information flow back to the cockpit instruments, for fear that the pilot might find gremlin replacements. It would not be surprising if airplanes guided this way occasionally flew into mountains when they seemed to be progressing smoothly toward their destinations“.

If the doctor had a hall of heroes, Robert would have to be the first inductee! Not only will your staff be lulled into a false sense of security when all of the gages in the dashboard are in the “safe” zone (and not look for the faulty wiring about to spark a devastating explosion), but, and this is especially true if their compensation is based on those numbers, they’ll start to perform dysfunctionally if such behaviour improves the score. For example, many call centres once thought (and some still do) that number of calls processed was a good metric. The result? The reps, who do their best to get you off the phone as soon as possible, don’t take the time to understand the true nature of your problem and instead focus on a “quick fix” to get you going again (even if such a fix, like “reboot”, doesn’t fix the issue and will only result in the problem re-occurring again and again). As a result, not only did the number of calls processed a day increase, but the total number of calls processed by the organization increased, because people have to call multiple times to get their problem solved. Not good. Not good at all.

Share This on Linked In

Know Your Software TCO & TVM

I’m a big fan of SaaS (Software-as-a-Service). I’m a big fan of the many benefits it offers, including almost instant deployment, immediate upgrades, and the fact that the provider handles the administration, maintenance, security, upgrades, backups, and other IT headaches that most companies just don’t have the IT resources for. And I’m a big fan of the economies of scale that are inherent in a true multi-tenant instance. But I am not a big fan of the recent marketing by a number of the vendors in the space that have recently gone “on-demand”. Most of these new “On-Demand/SaaS” providers have taken a myopic focus on TCO in their marketing, and are making strong claims that On-Demand/SaaS is always cheaper – which is not true.

Regardless of the software delivery model you select (on-site, hosted/ASP, on-demand/SaaS), there are a lot of factors to consider with respect to the Total Cost of Ownership and which model is cheaper ultimately depends on the specifics of the vendor pricing and your internal costs of support. A true multi-tenant SaaS provider who takes full advantage of the economies of scale across a large customer base and who passes those savings on to you will often be cheaper, but this is not always the case. Some On-Demand/SaaS providers aren’t as cost efficient as they claim, some solutions require a lot of manual (data) maintenance and user support (which results in hefty service fees), and, let’s face it, some providers, who will do a magnificent job of convincing you that on-site costs more than it actually does, will charge as much as they can get and use the bulk of your monthly subscription fees to line their pocket books with large annual bonuses. If you can’t calculate the true TCO of each solution under considering, you’ll never know which solution is more cost effective and when you’re truly getting a good deal.

I’ve addressed this issue in the past for e-Sourcing and e-Procurement systems in my post on uncovering the true cost of on-premise sourcing & procurement software (spreadsheet), but since many of you will soon be buying / upgrading again now that money has finally started to trickle back into your budgets, I thought I’d address it again. Especially since the calculation isn’t that much more involved for just about any type of Supply Management technology you might be considering. Basically, all you do is compute the (expected) x-2, x-1, x, x+2, and x+2 year amortized solution cost for the length of time, x, that you expect to maintain and use the software (based on typical enterprise solution lifespans in your organization) for each product under consideration, compute the average annual amortized cost, compute the expected savings, and select the solution with the highest ROI that best fits your organization.

Depending on the delivery model, the following will contribute to the total solution cost:

  • License Cost
  • Maintenance Costs
  • (Expected) Upgrade Costs (to Major Versions)
  • Base Hardware & Networking Costs
  • Hardware Upgrade Costs
  • (3rd Party) Data Costs
  • Database / Data Warehouse Costs
  • Application Server Costs
  • Reporting / Analysis / Optimization Engine Costs
  • Other Required Software Costs
  • System Design, Implementation & Integration Costs
  • Security Costs
  • Support Costs
  • (Re-)Training Costs

You calculate the total cost for each time-frame on a cost component basis using expected upgrade schedules, pricing trends, and expected utilization curves. Then you divide the expected total cost of ownership by the time frame and you get your annual amortized cost, or TCO by year.

Then you compute the expected savings by computing the expected cost savings in each of the following primary dimensions:

  • spend reductions (you expect to realizeequal to savings you expect to negotiate minus savings you expect to lose to maverick spend)
  • efficiency / productivity improvements
  • risk mitigations (which prevent losses due to supply disruptions, non-compliance fines, etc.)

Finally, you can compute the (annual amortized) ROI, or the Total Value Management, of each solution as the (annual amortized) expected savings / expect cost. Then you can truly compare each solution under consideration on a cost, and value, basis.

Share This on Linked In

5 Browsers and the Modes of Transportation They Resemble

This post by Caldwell Tanner on College Humor on the “5 Browsers and the Modes of Transportation They Resemble” is really cool. You have to check it out. The graphics are great!

  • Firefoxfairly well rounded but nearly unusable …
  • Safariwhile very efficient, its quality is vastly exaggerated …
  • Operasome people really love it, everyone else …
  • Internet Explorerworthless, but good for …
  • Chromevery fast, that’s about …

If You Won’t Splurge for Supply Management Technology (Rant)

When:

  • Spend Analysis can save you 10% to 15% of your total spend,
  • e-Negotiations can save you 5% to 15% of your total spend,
  • Strategic Sourcing Decision Optimization saves 12% above and beyond what you can save with e-Negotiation alone,
  • Contract Management can save you 13% on your contract labor and professional services spend alone,
  • e-Procurement will quickly reduce maverick spend by 36% or more,
  • Supply Chain Finance / Working Capital Optimization platforms can decrease your cash conversion cycle by up to 83%, and
  • Global Trade Visibility systems can decrease transaction processing time requirements by up to 96%

… and that’s just the tip of the iceberg with respect to the total savings available to you, if you won’t splurge for supply management technology, especially when many enterprise systems can now be obtained at a cost of only five figures a year (which is ten times less than they used to cost), then you’re a Complete Idiot and should join your kin in the tundra biomes of the Arctic. Continental, Delta, United, and Alaska Airlines all fly to Anchorage, and you can book flights through all of the major web portals. Get to it! The rest of us need to move forward.

Global Sourcing: Addressing Myths with Capabilities Part IV: Politics, Local Context, and Enabling Infrastructures

Today’s post is from David Henshall, Founder of Purchasing Practice. Dave can be reached at dhenshall <at> purchasingpractice <dot> com.

In this four part series, we examine eight dimensional capabilities that will help you overcome the myths surrounding global sourcing. In today’s post, we will focus on the final dimensions of politics, local context, and enabling infrastructure. (Yesterday’s post addressed risk and opportunity.)

Dimension #6: Politics

Politics matters in LCCS. As stated in my introduction to the series (Part I), much of the political noise from politicians, humanitarians and environmentalist can be misleading, resulting in flawed policies and strategies for governments and companies alike. This noise generally consists of allegations of:

  • Job exportation
  • Sub-standard quality
  • Child labour
  • Slave wages
  • Environment pollution

The problem with many of these allegations are that they come from a benchmark of western standards applied in a developing nations context. The assumption is that if we apply these standards it must surely help the people in developing countries. However, there is a real risk that codes of conduct, when applied inappropriately, may worsen social and environmental conditions for workers in these communities. To avoid such unintended consequences, Wilding & Braithwaite (of the Cranfield School of Management) advise companies that they must:

  1. anticipate the ultimate impacts of implementing codes of conduct,
  2. contextualize their application instead of simply demanding compliance with conditions that make little sense in a particular developing country context, and
  3. incorporate the voices of workers and communities in the design, implementation, monitoring, and impact assessment of codes in order to ensure a better fit between what workers and communities prioritize as opposed to what Western society think they ought to prioritize.

Some companies panic in response to negative media exposure of poor working conditions or the use of child labour at their supplier factories, and choose to sever their connections with these suppliers. Companies need to resist this ‘cut and run’ response and engage deeper with suppliers in applying policies which fit the local context.

Dimension #7: Local Context

Dr. Peter Lund-Thomsen, a visiting Researcher with the Copenhagen Centre for Corporate Responsibility, advises that organisations need to take the social, economic, environmental, and linguistic contexts into which codes of conduct are being implemented into consideration if we want to avoid producing unintended, often negative, consequences for the intended beneficiaries of codes.

The implementation of codes in isolation is unlikely to bring about sustained improvements in working conditions. Lund therefore advises that the emphasis needs to be placed on incorporating the concerns and voices of the ultimate beneficiaries of codes of conduct in the design, implementation, monitoring and impact assessment of codes.

Dimension #8: Enabling Infrastructure

For buyers, technology is a key component. The capability to view supply chain data on a single platform can be critical to achieving the real time visibility necessary to successfully mitigate the risk in extended supply chains. Technologies such as RFID can also support the transactional visibility as goods move between handling units in the supply chain.

Buyers can play a role in enforcing local legislation and in providing the necessary expertise, resources, and infrastructure that enable developing country suppliers to meet their legal obligations.

Organisations who engage with suppliers over the long term, in terms of providing the necessary resources and expertise that will enable them to improve their social and environmental performance, are likely to be the most successful in maximising the benefits of LCCS. The ‘cut-and-run’ response in relation to negative media publicity is likely to do more harm than good if the aim is to improve the workers’ conditions and reduce environmental pollution at supplier factories.

Thanks, Dave.

Share This on Linked In