Category Archives: Technology

the doctor Gives You Nine Questions to Ask Your Technology Vendor

Inspired by InformationWeek’s 9 Questions To Ask A Tech Startup, here are the equivalent nine questions that you should be asking your prospective sourcing and procurement technology vendors.

What’s Your Background?
This question applies to founders, key executives, and the company itself. Look for the right mix of people with deep technical expertise, deep domain expertise, and proven success in managing a growth company in a growth industry. If the depth of technical expertise is building websites (and all coding is outsourced), the depth of domain expertise is buying office supplies, and the depth of management expertise is managing a team of advertising executives – RUN!

When Was Your Company Formed?
Anything less than two-to-three years is a cause for caution. You want to see maturity in terms of the management team, revenue, and the product.

What’s Your Financial Situation?
You want to know where the company is getting the money it needs to support day-to-day operations. Is it drawing on VC funding? If so, at what rate is the required draw decreasing on a monthly basis and can the company honestly expect to be at least break-even before the funding runs out?

Do You Expect To Be Acquired?
Most companies in this space are start-ups, or were in the not-too-recent past. They should have had an exit strategy from day one. If the exit strategy was acquisition, how soon do they expect that to happen? If the exit strategy is six months down the road, be cautious – since many companies in the space will acquire a competitor just to take it off of the playing field – and there goes your investment in learning to use their technology!

What Do You Have Today?
Every vendor and their dog will paint you a rosy picture of where the space is going and where their product is going if you give them the chance, but what’s really important is what they have today. You’re buying a product because you need to increase productivity and decrease costs today – not 3 months or 3 years from now! Furthermore, this is an emerging market – that means that not every solution is equal, and, thus, not every solution is equally appropriate for your needs. You really need to understand what the vendor has today and how it solves your problems.

What Success Have You Had With Customers Similar To Us?
The usual “our e-auctions have saved an average of 12%” is not enough to base a decision on. Although you shouldn’t be considering any vendor who can not make a significant productivity or savings claim, you want to be sure that the vendor you select has saved money in the categories that you need to source or reduced processing time in the processes that your organization employs. An average is just that – an average. Maybe they save on average 20% on office and janitorial supplies and 2% on high-tech purchases. If the bulk of your purchases are for high-tech, then the product they have today is not the product you’re looking for.

Can I Talk To An Early Customer?
You’re looking for a company that has demonstrated the ability to continually improve – not just a company that expresses a willingness and a grandiose roadmap. An early customer will be able to give you insight as to whether or not you can expect the promised savings or productivity gains, how long it’s likely to take, and whether the company has a history of delivering on its roadmap and promises.

Who Are Your Competitors?
The list they give you should be similar to the list you build yourself after doing your homework. If it’s not, either they don’t understand what they’re selling or don’t think they stack up well against their real competition. Either way, it’s a warning sign.

Can I Visit Your Offices?
You want to feel comfortable that you’re dealing with a professional, mature company. This is sometimes the only way to know. Just because the salesman is slick and well-prepared, doesn’t mean the company is well managed. And just because the competition tells you that the company you’re considering is four-guys-in-a-garage, doesn’t mean it is. The opposite can be true. Just like you take the time to visit a new supplier before giving them a major contract, take the time to visit a new technology vendor before giving them a major enterprise contract. It’ll only take a day and won’t cost you much, especially compared to how much you could lose if you pick the wrong vendor!

the doctor On Dashboards: They’re Dangerous and Dysfunctional

A colleague of mine recently remarked that the whole dashboard concept is stupid beyond belief and just a lot of malarkey and I have to agree. “Dashboards” as they exist today are completely useless, and, in general, the concept is mostly useless.

As my enlightened colleague would say, a single metric on a dashboard is like saying one idiot light is better than the combination of oil pressure, water temperature, and battery voltage gauges. Sorry, it’s not. And, guess what, you can’t see the relationship between oil pressure and water temperature, so you could have a “TEMP” light that’s going off because oil pressure is nonexistent and you’re scraping the metal off the cylinder walls! It’s useless.

The fundamental flaw is that today’s dashboards are marketed as a snapshot view of how well your organization is doing. A dashboard can not tell you how well you’re doing. To do that, it would have to know everything you’re not doing well, determine how much that is impacting your overall performance, and report that. However, the best it can do is capture the data it’s been programmed to capture, roll-up the metrics it’s been programmed to roll up, and do the built in calculations of efficiency based on those roll-ups.

Just because it reports 90% of spend “on contract” does not mean 90% of your spend is “on contract”. Maybe 10% of your total spend on a commodity under contract has been misclassified under the wrong commodity code, and all of this spend is off contract, meaning that only 82% of your spend is actually on contract. Just because it says on-time supplier delivery is 95%, does not mean that you’re doing a fantastic job of managing your suppliers and that only 5% of shipments are late. Maybe it’s only recording shipments late if they don’t arrive on the designated day and not taking into account the time of arrival – which could be a consistent 2 to 4 hours late. Since this could require a lot of overtime by your warehouse crews who arrive early with nothing to do for the first two hours, this costs you. And so on.

A dashboard can only provide an upper bound on how well you’re doing, and this is useless. Saying my efficiency is at most 98% when it is in fact 92% is useless and unactionable. I can say your efficiency is at most 100% and always be correct – and I don’t need an overpriced software hack to tell you that!

The most a well designed “dashboard” could do, if the goal was reversed from trying to tell you how well you are doing, which it cannot do, to how poor you are doing, is give you a lower bound on how poor you are currently performing. Whereas “my efficiency is at most 96%” is not useful, “my inefficiency is at least 4%” is useful. That tells you that not only are you not performing at 100%, but that the system, even though it’s unable to identify all sources of inefficiency, has found 4% inefficiency that is immediately actionable. Whereas “at most 88% of spend is on contract” is not useful, “at least 12% of spend is off contract” is useful because it identifies some low hanging fruit that should be immediately tackled to improve spend compliance within your company. Of course, this is assuming that the process used to compile the data and calculate the metrics isn’t fundamentally flawed (which it very well could be in some of the dashboards out there).

Of course, this is still nowhere as useful as a good spend analysis or business intelligence tool that allows a seasoned analyst to construct some well formed cubes and drill around as she desires – as such an analyst would find anything the “dashboard” would find in about five minutes of drilling into the “spend cube” or “efficiency cube”. Furthermore, even if you covered an entire wall with dashboard displays, you still wouldn’t get close to all the perspectives you could come up with by drilling around a couple of well formed data sets.

Basically, all today’s dashboards do is present a pretty picture of a rather useless report. And I don’t want to hear any arguments that they’re “flexible” or “configurable” or “customizable” and that they can do whatever you want them to do – they can’t – they can only be “customized” or “configured” to the extent that they were built to be “customized” or “configured” by the development team – who probably had little understanding of your business, your data collection methodologies, your processes, and the information you really need to understand your business – and, in my experience, that’s usually not nearly as “configurable” or “customizable” as they would need to be to be useful even to the limited extent they could be if they were designed properly.

So next time someone tries to sell you a “dashboard”, thank them for the offer, and instead ask them about their analytics engine. That’s what you really need!

Achieving Supply Chain Visibility

Supply & Demand Executive recently ran an article by Aatish Goel & Murali Krishnan Sundararajan on “The Flat Supply Chain” that noted that globalization has created a massive increase in supply chain complexity and that supply chain visibility is emerging as a critical differentiator for companies to stay ahead of the competition.

The article also suggested that companies should manage supply chain visibility according to the process-technology-organization framework, and recommended the following from the process angle.

  • Effective S&OP Process Deployment
    An effective S&OP process brings the right information in front of all stakeholders in a timely manner.
  • Internal & External Inventory Turns Review
    Use a multi-echelon inventory visibility system that allows for regular review of inventory status inside the company and inside the supply chain as a whole.
  • Alerts & Exception Management
    The amount of data produced by a well-run supply chain at any point in time is huge and almost impossible for anyone to review manually (even with great analysis and reporting tools). Thus, it is important to have exception reporting and alerts to bring critical incidents and issues to the immediate attention of the right person.
  • Alignment of Supply Chain Metrics with Business Goals
    Use process-based metrics that complement business goals to monitor and improve the process.

This was a good starting list, but I’d also add at least the following:

  • Integrate PoS data and forecasting across the supply chain
    A supply chain view of inventory is not very useful if you do not know how much product you should have at any given location at any given time, and given that demand can fluctuate, using static forecasts to plan inventory is not optimal.
  • Use collaborative issue resolution processes
    When a critical incident occurs upstream in your supply chain that effects you, it’s important not just to insure your supplier, or your supplier’s supplier, starts working on a resolution immediately, but that you work with the supplier to not only insure a quick resolution, but to understand why the critical incident happened in the first place. Then, you can pass that knowledge onto your other suppliers and make sure it doesn’t happen to them.
  • Regular Review of Transportation Timeframes
    When calculating inventory requirements, it’s vital to understand how long, on average, it will take to restock a location in order to insure that you can handle demand spikes and not lose sales. If it takes 7 days, but a demand spike due to an upcoming promotion could wipe out inventory in 3 days, then it might be wise to temporarily increase the inventory requirements of that remote location.
  • Use Process Models
    Standardized, Integrated, S&OP processes are good – but streamlined process that are sound and complete are better. A process model will help you analyze your processes to make sure they are of just the right complexity. If your process is too simple, you could miss critical incidents or key data that could significantly change your forecasts and inventory requirements. Too complex, and you could lose the ability to react quickly.

From an organizational technology angle, the article had the following to offer:

  • Use an extended enterprise system.
    This will allow you to create a centralized data store, on which you can execute the data mining applications needed to detect exceptions and critical incidents, the analytic applications need to determine required inventory levels and transportation timeframes, and the reporting applications necessary to insure key information gets to key stake-holders in a timely and comprehensible manner.
  • Extend it with specific business solutions.
    The article recommends inventory optimization tools, business intelligence tools, and master data management tools.
  • Look at Service-Oriented Architectures (SOA)
    This can enable flexible collaboration at a lower cost.

This is a great start, but you should also consider the following:

  • Look at On-Demand SaaS
    Building a completely integrated supply chain management framework, even using SOA, will be a very time-consuming and costly endeavor even for the most technologically sophisticated organization. Starting with on-demand SaaS can allow an organization to get a fairly sophisticated system of supply chain management tools up-and-running quickly and cost-effectively.

In conclusion, the authors have it right – with supply chain complexity having increased exponentially in the last decade thanks to globalization and increased outsourcing, visibility is becoming key to managing risk and total cost and the time to do something about it is now.

the doctor Shall Also Remain Spaceless

While browsing the Supply Chain Management Review site recently, I stumbled upon the article “What Supply Management Can Learn From MySpace”, and I was scared. Although not as bad as Facebook, I still think of it as a time-sucking black hole filled with meaningless banter between teens, twenty-somethings, and the unemployed – with poorly designed pages that would burn a good designer’s eyes right out of their sockets to boot! (I did investigate it back when it was new – I signed up, looked around, quickly came to the conclusion that it was too much effort for too little return, and abandoned it.) The only thing it’s useful for, from a business perspective, is to discover new artists – which is only good for those looking for bands to book or labels looking for bands to sign. Not really supply management.

I read the article anyway, just to be sure they weren’t advocating its use and that my view of the SCMR as one of the better publications wasn’t misplaced, and it had a few good points. It noted that to succeed in this quickly changing tech-savvy world, companies must think, even “work”, differently. Which is true, but this doesn’t mean embracing every fad that comes along – it means finding new technologies and processes that actually improve productivity. The goal of business is to be productive and make money, not socialize with friends. (This may be the goal of most big business executives, but it’s not the goal of business. )

It also pointed out that communication, globalization, and on-demand collaboration is a good thing. I agree, but remembering that communication implies (a two-way) information exchange, I don’t often see much of that on MySpace. It’s not as global as you might think. And it doesn’t really enable collaboration the way that new sourcing and supply chain offerings from the leading on-demand vendors (like Arena, Iasta, Salesforce, etc.) do.

The article also pointed out a few technological trends that are important:

  • broader-based adoption of PLM technologies
  • emergence of CAD and PDM lite technologies
  • standardization of collaboration features
  • unilateral migration to service-oriented architectures

I agree that these are important, but I would question whether they are business equivalents of MySpace, for these achieve effective goals in the business world due to their differentiation from MySpace, not their similarities.

In short, while I will admit that the notion of examining new developments in social technologies as a means of drawing inspiration has merit, the notion of trying to create innovative business applications by creating something that is equivalent to a social networking sites does not. First of all, there’s no guarantee that it will bring any business value in terms of productivity or cost savings. Secondly, there’s no guarantee that it’s not a fad, and that people will want to use it by the time you have a business equivalent. Thirdly, you’re blurring the world between business and pleasure, which is a slippery slope to be sliding on.

So while I agree you should always be on the lookout for new and better technologies, I’d be cautious about jumping on the bandwagon of the next social network fad that comes along. Chances are that, in the long run, it will be nothing more than a drain on your time and resources. There’s a reason that a large number of organizations in the public and private sector have blocked access to sites like MySpace and Facebook. If I were you, I’d take the clue.

“Demand Shaping” or “Demand Sensing”?

The EE Times ran a great article by Romit Dey and Manoj K. Singh last month on “Demand Shaping” and how it aligns customer trends with supply. But I have to ask, is it really “demand shaping” or is it more “demand sensing”. Is not “demand shaping” what marketing and advertising does? It’s true that supply chain has a supporting role, in terms of letting marketing know how much a product can be produced for, how many units can be produced, and how fast the units can be in consumers hands. However, what supply chain really does, in a company that runs like a well-oiled machine, is sense the demand that has been created, and the demand that is in flux, and adapts to the situation.

So what is “demand sensing”? According to the article, which calls it “demand shaping”, it is a demand-driven, supply-constraining customer-centric approach to planning and execution that aligns process with customer demand at strategic and tactical levels and with an organization’s capabilities which helps optimize use of resources, reducing excess inventory and improving inventory turns. More specifically, at the strategic level, the emphasis is on aligning customers’ long-term demand patterns to long-term resource and capacity constraints and at he tactical level, the focus is on understanding demand patterns and then influencing customers’ demand toward available supply, using the levers of price, promotion and products/services bundling.

How do you sense demand? As the article points out, you need three key capabilities:

  • demand pattern recognition
    who is buying what, when, and in what quantity
  • supply supportability analysis
    how much can be made, when, and how fast can it be delivered
  • optimal demand steering
    if demand patterns suddenly change, and you do not have enough of product A, can product B be used as a substitute and can customers be steered to that product instead

The first skill is obvious – you need to manage inventory appropriately so you aren’t holding too much, and generating excessive inventory carrying charges, or holding too little, and selling out before supply can be replenished. The second skill is less obvious, but easily understood – you need to know how much you can make, and how fast it can be made, to appropriately plan your inventory level.

The third skill is what takes “demand sensing” to a whole new level, to the point that it is almost “demand shaping”, but not quite, and hence the source of confusion. It is, as it’s called, “demand steering”. The Dell example the authors use is the best. By maintaining real-time visibility into its supply chains, Dell knows its inventory levels now and in the immediate future on an hourly basis. If a customer configures an order for a 60GB drive on their web-site, and Dell knows they don’t have enough stock to configure the system immediately, then Dell informs the user of a delayed ship date and presents the customer with an opportunity to replace it with an 80GB drive at a discount – steering the customer towards another product that can meet their needs, even if it is more expensive, but Dell takes a discount on margin to make the sale and keep the customer.

The key to success, as the article points out, is to make sure that all three processes are part of a single, integrated loop. A supply supportability analysis is run on a regular, automated, basis; inventory is updated on a near real-time basis; and short-term forecasts are updated at least daily. Each of these numbers is compared on an automated basis, and as soon as forecasts exceed inventory and obtainable supply, an alert is sent to a planner who determines whether there are alternative products that can be used to meet the need or if marketing and sales needs to be informed that they need to take actions to steer demand on their end. Then, customers are steered towards the alternative products through the appropriate channels – in real-time.

The article also does a good job at overviewing what is required for a demand sensing framework. The elements it outlines are:

  • inter and intra organizational connectivity
  • the ability to capture, structure, and comprehend data from customers and channels
  • advanced business intelligence to identify demand patterns
  • optimization
  • common processes
  • a common data model
  • common performance metrics
  • available-to-process capabilities
  • exception management
  • electronic negotiation and collaboration

The best thing about the framework is that these are basic capabilities and processes a good organization should already have in place. It’s just a matter of tying them together and using them wisely!