By now, you've probably heard the foreshocks of the latest vendor to enter the supply management space in North America, iValua. iValua is a ten-year old French software solutions company that has slowly built up a broad e-Sourcing and e-Procurement solution that covers most of the bases that I outlined in my post where I reminded you that it's sourcing and procurement, in which I also reminded you that you don't have your supply management bases covered unless you have a solution, or set of integrated solutions, that cover the basics.

In that classic post, I indicated that the basic cycle was the following:

• Spend Analysis
  Analyze spend related data and find the best sourcing opportunities,
• RFX
  solicit an RFI, RFP, and/or RFQ and/or
• e-Auction
  initiate an e-Auction then
• Decision Optimization
  make the best award using available data and
• Contract Management
  start the contract management lifecycle.
• Requisition
  A requisition is created when a good or service is required and
• Approval
  if it is against the existing contract, it is approved
• Purchase Order
  and a purchase order is created off of the contract.
• Goods Receipt
  When the supplier delivers, a goods receipt is created and
• Invoice
  the invoice is recorded and
• Reconciliation
  the invoice is reconciled against the goods receipt and purchase order.
• Payment
  Payment is made after reconcilation
• Tax Reclamation
  and if VAT is reclaimable, filings are made
• Spend Analysis
  and after time has passed, the payments are analyzed to insure spend is on target.

With respect to this cycle, iValua has modules that cover the basics for just about every phase except for decision optimization and tax reclamation. In addition, the suite also has modules that address:

• Sourcing Process Management
  which allows sourcing processes to be customized and managed as sourcing projects
• Procurement Process Management
  which allow you to define your own requisition, approval, and purchase order creation and delivery processes
• Supplier Performance Management
  which allows you to create surveys and track performance metrics
• Budget and Expense Management
  which allows you to create budgets by organizational unit and sub-unit and capture expense reports
• Customization
  which is an extensive administration module that allows branding, coloring, wording, dashboards, roles, permissions, security, and default processes to be configured

All-in-all, it is one of the broadest supply management suites in the market. In my next post, I'll provide more details on some of the various modules.

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The Sourcing Innovation Resource Site, always immediately accessible from the link under the "Free Resources" section of the sidebar, continues to add new content on a weekly, and often daily, basis -- and it will continue to do so.

The following is a short selection of upcoming webinars and events that you might want to check out in the coming weeks:

They are all readily searchable from the comprehensive Site-Search page. So don't forget to review the resource site on a weekly basis. You just might find what you didn't even know you were looking for!

And continue to keep a sharp eye out for new additions!

The Harvard Business Review recently ran a great article on Breakthrough Ideas for 2010. While many of the ideas aren't new (as a few can easily be traced backed decades), for many, their application would be. But more importantly, their application could fix a lot of problems in the world today.

What really struck me was how they all had good supply chain equivalents that could help you revolutionize your supply chain. So, over the next three posts, I'm going to explain how their supply chain equivalents are ideas you should strongly be considering if you haven't implemented them already.

1. Motivate Your Employees With Meaningful Goals, Resources, and Encouragement.
   Recognition does indeed motivate workers and lift their moods. As the authors note, you need to take great care to clarify overall goals, ensure that people's efforts are properly supported, and refrain from exerting time pressure so intense that minor glitches are perceived as crises rather than learning opportunities. And your benefits will multiply if you cultivate a culture of helpfulness and of learning. Happy, challenged, engaged workers are productive workers.
   In addition, if you're a manager who knows that the head of Sales from down the hall is Maury the Management Moron who likes to constantly promise first, worry about delivery later, and then bug your people on a regular basis for this piece of information or that report or participation on a last-minute call, you need to put a stop to that behaviour immediately. You need to make it very clear that *ALL* requests go through you, and no one else, and that if you ever, ever, ever catch him bothering one of your hard working sourcing or IT professionals without your approval, you will take him to task, and if he keeps it up, you'll bring in Mr. Louisville if you have to. Nothing is more disruptive to productivity than when Maury the Management Moron is out of control. Nothing.
    
2. Remotely Monitor Your Supply Chain Health.
   Just like remote monitoring of patients using a kiosk or similar device is a health-care breakthrough, remotely monitoring the status of your OEMs and shipments is a breakthrough for your supply chain. A supply chain visibility solution that lets you keep track of where your raw materials and inventory is at all times is truly priceless. It enables you to detect minor deviations before they become major disruptions and fix them. And if something major happens, such as a natural disaster shutting down a factory, a civil disruption cutting off a transportation route, or a political embargo closing borders, you'll know almost immediately and have time to implement your risk mitigation plan.
    
3. Fund an R&D Center.
   I've said it before, and I'll say it again. R&D labs are what made North America great in the latter half of the 20^th century. Pretty much every major technological advance that didn't come from a DoD sponsored initiative came from a private research lab like the ones that used to be (significantly) funded by AT&T, Bell, Xerox, and TI -- and which are on the verge of going extinct. (We hardly hear of AT&T labs anymore [just endless commercials about their network], Bell is now Alcatel-Lucent, Xerox Parc is now just Parc, and the original TI Labs have been replaced with the new "Kilby Labs".) Breakthroughs come when you have time to sit down and think about the bigger picture and experiment, not when you're trying to meet quarterly targets.
   The R&D lab doesn't have to be a big one. You could start with one person who's job is to simply evaluate potential technologies and processes that could improve your supply chain, and then slowly add a couple of people to help with the institutionalization of best practices, staff development (after they attend train-the-trainer workshops), and system maintenance. Then bring in an engineer to work with your supply base to take cost out of the process and a systems architect to help your vendors build better systems that meet your needs. After a few years, the ROI will be simply extraordinary as you transform into a best-in-class world-leading organization. 

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Stop relying on spreadsheets!

I thoroughly enjoyed this recent article over on SupplyChainBrain on how Intel Takes The Top Spot in the Supply Chain Innovation Awards. The article pointed out that Intel enhanced product availability by scrapping its reliance on spreadsheets and embracing technology that creates a real time, available-to-promise (ATP) environment.

As a business management tool, Spreadsheets Suck, straight and simple. Considering that up to 90% of spreadsheets contain non-trivial errors and that they are barely adequate at the task they were designed for (which was day-to-day ledger-keeping, and nothing more), it should be pretty obvious that they are not an operations management tool. And while it used to be the case that you didn't have any other option as a small or mid-sized business because the traditional, installed, behind-the-firewall enterprise software packages were ridiculously expensive and beyond your grasp, that's no longer the case. In many areas of technology, you can now take your pick of multiple SaaS options that cost, at most, a few hundred per user per month. And that's for the really good stuff. If you can get by on the more-than-good-enough 80% solution, you can probably find a solution for $20 to $50 per user per month.

After ditching their spreadsheets and implementing real tools, within three years Intel:

• increased the percentage of change orders confirmed in one day from 21% to over 70%
• increased Committed Dock Date from under 25% to over 96%
• reduced manufacturing cycle times by 62%
• decreased raw material, Work-In-Progress, and finished goods inventory by 33%
• improved Weighted Mean Absolute Percent Error by over 20%

Isn't it time you stopped relying on spreadsheets to drive your business?

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If you're still using spreadsheets to run any aspect of your sourcing, procurement, or supply management operations, then you're working at the edge of a steep cliff over a deep ocean waiting for the earthquake to come. I bring this up yet again because I recently stumbled upon an article over on the Harvard Business Review blogs on why good spreadsheets make bad strategies, which, by the way, they do.

What has this obsession gotten us? The economists have gotten it consistently wrong. And, moreover, the same economists who totally missed the recession turned back to the same quantitative, scientific models to predict how the economy would recover [after 2008], only to be mainly wrong again. CEOs keep on giving quarterly guidance based on their sophisticated financial planning systems and keep on being wrong -- and then get slammed not for bad performance but for their failure to predict performance exactly as they promised mere months earlier. (Hence my distaste for Wall Street and my recent praise for private equity.)

Now, while CEOs and their CFOs would love to be able to extrapolate last month's sales quantity and predict next quarter's sales, but sometimes they find out that those sales weren't as solid a base for growth as they might have thought -- especially if some of the customer relationships underpinning them weren't as strong as they might have imagined.

The fundamental shortcoming is that all of these scientific methods depended entirely on quantities to produce the answers they were meant to generate. They were all blissfully ignorant of qualities.

What people keep forgetting is that, in business, numbers are meaningless out of context. 1M in revenue this year means nothing if you don't maintain whatever quality earned you that revenue this year. If you got the business because you had a better product, and you're in an industry where products improve quarterly, and you don't continue to invest in improvements, you can't project 1M next year. Loyalty only accounts for so much in many categories, like technology and electronics.

So, as a forecasting tool, spreadsheets are even more useless than you tend to think they are. And they're even worse as a business tracking tool if you're engaged in global trade, because they don't automatically update when the regulations and tax rates change. And paying the right amount can get you fined, and even jailed if it was determined that you did not make any efforts to insure proper payments and filings (if you're an officer of the company).

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The past decade has been rough on many companies, but technology companies appear to have bore the brunt of it. Check out Fortune's biggest losers over the past decade over on CNNMoney.com. Eight are technology companies, and all make Ariba's Market Cap Loss of 46 B [as chronicled in James Kwak's The Myth of Ariba and discussed in my post on Will Private Equity Players Offer You Better Value Than Public Equity Players] look like pocket change!  (Ariba Peak: 47 B, Recent: 1 B, approx.)

Lesson learned? Besides the fact that market valuation should never exceed a reasonable multiple of revenue (10X might be okay in extreme situations for true up-and-comers, but 100X is ridiculous), I'd have to say that this also teaches us that Software and Hardware is not worth more than the value you are able to extract from it.

They make great editors!

Every Blogger Needs to Have a Cat

To the tune of Everybody Wants to be a Cat from Disney's The Aristocats.

Every blogger needs to have a cat,
because a cat's the only cat
who knows where it's at!

Everybody's pickin' up on that feline beat,
'cause everything else is obsolete.

Now a square on the keys,
can make your eyelids squeeze,
ever'time he writes;
and with a square in the act,
he can set writing back
to the caveman days.

I've heard some corny birds who tried to write,
but a cat's the only cat
who can get it right.
Who wants to be fleeced
by a long-winded piece
or stuff like that?
When Every blogger needs to have a cat.

Now a square on the keys,
can make your eyelids squeeze,
ever'time he writes;
and with a square in the act,
he can set writing back
to the caveman days.

Every blogger needs to have a cat,
because a cat's the only cat
who knows where it's at.

While writin' jazz you always has a Welcome mat,
'cause everybody digs editor cat.
Everybody digs editor cat.

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As highlighted in this CNet video which asks does Twitter make you stoopid (at the 2:35/4:15 mark), students [are] failing because of Twitter, texting. The University of Waterloo in Ontario, which has world renowned programs in mathematics, computer science, and engineering (among other disciplines), requires all students they accept to pass an exam testing their English language skills. Almost a third are failing. "Thirty per cent of students who are admitted are not able to pass at a minimum level", a failure rate that has increased five percentage points in the past few years. Poor grammar is the major reason students fail. "Emoticons, happy faces, sad faces, and cuz are some of the writing horrors being handed in". "Punctuation errors are huge, and apostrophe errors".

According to the news release, experts in the field are saying that "cellphone texting and social networking on Internet sites are degrading writing skills. And since Twitter is both, I think it's finally safe to say that Twitter will make a twit out of you, and that's not a good thing. After all, the proper definition of twit is an ignorant or bothersome person. Do you really want to be uninformed (dumb) and annoying? I don't! (And while those of you who know me might say I already am, Twitter takes ignorance and annoyance to a whole new level. Let's not go there. After all, now that it's been demonstrated that when a twit speaks in the Twittersphere, no one hears, there's just no point. )

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I have to wonder after reading this recent article on the power of online real-time bidding in The Global Graft Report. The article described Chile's procurement system which goes beyond the simple e-tender submissions common in Canada and the US and actually uses real e-Procurement functionality, including real-time, public e-auctions.

Chile's system is simple and cost-effective. Government agencies submit a projection of their needs to a website. It compiles a list of the requirements and then invites suppliers to bid. Their proposals are concurrently submitted to the website, where all bidders and the general public can see what's offered. The real-time aspect of the program allows suppliers to adjust their bids depending on what other bidders are offering, spurring more competition. At every step, the process is completely transparent.

That's the way it should be. Not a one-time sealed bid submission against a probably incomplete specification, with the award going to whomever is the lowest cost among the suppliers deemed competent to "deliver the goods". (Which allows corruption to run rampant in the hands of the less than worthy, who can judge who is and is not competent to deliver without consequence.)

Especially now that modern systems can handle bid packages as complex as you want them to be! And hey, as the Swedish Public sector found out, if you throw optimization into the mix, you can truly get optimized auction results.

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Nilofer Merchant's The New How: Creating Business Solutions through Collaborative Strategy is a great book for those that truly want to collaborate but also need a framework for collaboration along with some practical advice on how to actually get down to the business of collaboration. A veteran of strategic thinking and innovation in the business context, Nilofer goes beyond simple academic frameworks and packs each chapter with examples and real-life situations that illustrate her points.

Furthermore, while the book does introduce some new terminology that, for the most part, is unnecessary, it's pretty much limited to:

• The New How
  which is Nilofer's way of saying that siloed businesses can no longer survive and that they have to embrace more collaborative ways of working together,
• The Air Sandwich
  which is Nilofer's way of referring to the void that exists between the executive suite and the trenches in an average large organization, filled by middle management who are supposed to be bridging the gap but who, usually, only widen it with their inability to truly understand both the corporate strategy and shop floor details that they are not part of on a daily basis,
• Murderboarding
  which is Nilofer's process of using a razor-sharp tool to slice away at fuzzy thinking and kill off good ideas to let the great ideas thrive, and
• Chief of Answers
  which is Nilofer's characterization of the current, doomed, organizational model where one person is responsible for driving all strategy.

Furthermore, while most of the book is focussed on Nilofer's QuEST (Question, Envision, Select, and Take ownership) process for the collaborative creation of strategy, Nilofer also realizes that collaboration requires more than just a process. Thus, the first part of the book spends a couple of chapters on how to "be" a collaborator -- which requires us, at a minimum, to listen and understand, and the last part of the book focusses on the bigger picture and provides us with the "glue" necessary to mesh the people with the process in a way that can produce real results.

But what makes the book great is that even if you tossed the framework, every chapter is filled with practical, down-to-earth advice, on how to become a true collaborator and real-world examples of not only how to apply the concepts, but what might happen if you don't. For example, Nilofer starts the book by describing one of her own experiences where she was in charge of revenues for the Americas in a large multi-national software company. She described how, one day, the VP dropped by to explain how the company had decided to diversify their product line six-fold within the coming eighteen months -- with no input at all from the trenches or even (senior) middle management -- based solely on the results of a market exploration which convinced senior management it was "the right idea". Somehow, sales and marketing would generate demand while new products were developed in parallel. The CEO said "We Must", the (senior) VPs said "We Will", and everyone charged forward on the vision, and edict, handed down from on high.

The results were, as we would now expect, predictable. A few months into the new revenue cycle, Nilofer received a call from the lead product manager for the new suite. It started off with "We have a problem here. You know the lead product? Yeah, the one that's supposed to net us most of this year's revenue? We're not going to be able to ship it with all the features we originally planned." Meetings and chaos resulted, with the typical end-result where the product was shipped on the planned release date, knowing full well it wouldn't live up to the expectations marketing had created. And it didn't sell well. Revenues were weak. Customers that bought were unhappy. The team was demoralized and the corporate culture took a nosedive. Several talented staff members resigned. And it took a while for the company to recover.

And it was all preventable. Had the strategy not been created in a vacuum in the senior executive suite, but collaboratively with the front-lines who could have provided feedback on what could be done, and when, chances are that a simpler vision could have been successfully delivered to greater profits than the unmaintainable grand vision that was decided on the simple basis of a market-study with no cross-company input.

After all, as Nilofer points out in the Introduction, there's not much difference between strategy success and strategy failure. The formula for both is summarized as:
good intent + good idea + talented direction + hard work + "magic black box".

The difference is that in a successful strategy, the "magic black box", or the details of a successful execution are worked out before the strategy is adopted and launched. Strategy fails when the keys to making a strategy operational cross-functionally are not uncovered soon enough. This happens when a company jumps from "grand vision" to "execution" without sufficient exploration and planning, not because the idea is bad, or the direction is off, or the people aren't talented and hard-working enough. And that's why Nilofer wrote the book, to try and help people understand how to replace the "magic black box" with a "successful execution strategy" so that you can be a winner every time. (Because winning today is not enough, you have to win tomorrow, and smart companies go for a series of smaller wins rather than betting the farm on one big win.)

And while I'm not going to get into the nitty gritty details and give it all away, since this is another book I believe you should carefully read cover-to-cover (I did), I am going to give you some examples of the practical, down-to-earth advice that the book is crammed with.

• Even bright, talented, and motivated people cannot jointly create effective strategies until the fundamental enablers of collaboration are in place.
  Some people have to be guided, and, more importantly, the organization has to foster a culture of collaboration. If the corporate culture is "I own my domain, you own yours" and every manager is always trying to one-up the manager down the hall for greater recognition from the CEO, collaboration is not going to happen.
• Setting direction is an art and a practice.
  Just like strategy is a noun and a verb. You have to have a vision not only of a goal, but of a realistic execution strategy to get to the goal.
• The hallmark of thorny strategy problems is that they involve contradiction - that is, they contain a set of conflicting goals or imperatives that create a tension that defies objective resolution.
  And there's rarely just one right answer. To find the answer, you'll have to take on tough debates, uncover tacit issues, and work with your "foes" to developer a deeper understanding of the issue that will allow everyone to collectively reach a solution that everyone can live with, get behind, and execute on. Furthermore, by acknowledging and addressing those tensions as we develop ideas rather than smoothing things over, we'll end up with an even stronger, more viable set of options. It's one of those pay-me-now or pay-me-later choices.
• It often happens that our Achilles heel as leaders is attempting to come up with the answers and solve the tough problems by ourselves.
  Even a genius doesn't know everything, and a true genius admits it.
• In the long run, what truly matters is not what each of us knows today, but out ability to continue expanding the aperture of what each of us can see and understand tomorrow.
  That's pretty much the reason Sourcing Innovation exists!
• Powerpoint slides are just another form of air in the sandwich.
  Powerpoint slides capture high-level ideas, not understanding. For a corporate strategy to be successfully executed, everyone in the organization has to understand it, not just 1 in 20 individuals (which is the number of individuals who understand corporate strategy in your typical organization today). You don't want to be in the situation where you were looking for a strategy, but only found a PowerPoint.

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