Imagine what your company could do with invoice automation. As per this recent article over on Shared Services Link on how to turn payables into an opportunity and add $3M to your bottom line, Telus, a 10 Billion telecommunication products and services provider which typically receives 15,000 to 20,000 paper invoices per month, implemented a supplier portal, electronic invoicing, and a dynamic discounting solution that allows them to save 3 Million annually.
When you consider that 10 Billion is big, but not that big these days, that a lot of organizations receive 15,000 to 20,000 paper invoices a month, or more, and that a supplier portal is pretty primitive from an automated invoicing viewpoint, you quickly see that there is quite a lot of opportunity for your organization to save quite a lot of money from invoice processing. In some organizations, the overhead alone from manual processing exceeds a million dollars, and this barely covers a detailed review of 10% to 20% of the invoices. Proper automation insures m-way matching on 100% of invoices with exception-based processing on the 10% to 15% that contain issues or errors.
You see, when you implement the right invoice automation solution:
And then, instead of spending $30 to $40 to process an single invoice, you'll be spending $3 to $4. So, if your organization is processing 10,000 invoices a month, you'll see your overhead costs drop about $300,000 and you'll save upwards of 3 Million a year before dynamic discounting or other supply chain financing solutions are put into the mix!
For more information on how your organization can save 3 Million, download Sourcing Innovation's recent white-paper on An End-to-End Invoice Automation Framework - Ten Keys to Success (registration required), sponsored by Nipendo.
As we have demonstrated in the last 9 posts, India has some serious challenges ahead of it. And despite the severity of the challenges like education, health care, and even sanitation, it has even bigger challenges still. The first of these, that we will address in this post, is the social norms.
The first challenge is with the general populace. For example, as Dreze & Sen chronicled in An Uncertain Glory, if asked, due to the fact that there is a model (if not an effective one) for bringing public health care to the rural areas and a growing private industry where you can presumably get what you need when you need it (if you can pay for it), most Indians believe they have reasonable access to health care. Given the considerable number of deaths from infection, the very high citizen to physician ratio, and the average number of people each health care center needs to serve, this is not the case. Secondly, due to the lack of progress on education, and the fact that 10 years after the first PROBE study there is still a significant lack of teaching days, there is obviously an opinion that the education being received by the average Indian child is adequate, which is a perception that is far from reality. There should not only be an uproar about the lack of teachers in some districts (as one per school clearly is not enough given the size of India's population), but also an uproar that these highly paid individuals are absent 20%+ of the time!
The second challenge is with the government. The government doesn't want to tackle tough issues, and certainly doesn't want to take any steps that might cause a considerable backlash from any group of a significant size. Plus, if you look at the relative spending on health care and education in India versus other BRIC countries (Source: World Bank), total spending in India on health care (including the private sector) is a mere 3.9% versus 5.2% in China and 8.9% in Brazil, largely due to the fact that the public sector spend on health care is 1.2% of GDP compared to China's 2.7% of GDP. If you look at Education, India spends a mere 3.1% (Source: Wikipedia) compared to China's 3.9% (Source: Xinhuanet) and Brazil's 5.1%. India is not adequately spending to address it's most fundamental problems.
Government spending in India for 2013 is estimated at 302 Billion USD while revenues are projected to be 210 Billion USD. While that's not a lot considering that India has over 1.2 Billion people, it's still enough to do something. So where is the Indian Government spending its money? If you look at the Budget at a Glance as posted on the Government of India Site, over 1/3rd (37%) of the non-capital non-plan expenditures, which constitute almost 60% of projected expenditures, are going to interest payments and prepayment premium (370,684 crore of 992,908). The next biggest category (at 23%) is subsidies (231,084 crore of 992,908). The third biggest category (at 12%) is defence services (116,931 crore of 992,908). Grants make up 8%, pensions 7%, and the police make up 4%. The budget is rounded out by economic services at 2.4%, general services at 2.3%, and social services at a whopping 2.3%. (Taking us to 98.5% of the budget.) The remaining categories consisting of the postal deficit, the NDRF (National Disaster Relief Fund), union territory expenditures, and foreign government grants collectively amount to about 1.5%. Of the plan expenditures, all of the non-capital expenditures (27%) go towards the central plan and central assistance. In other-words, relatively speaking, India is spending too much on servicing its debt, paying its pensions, and defending its country and not nearly enough on education, health-care, and other economic assistance to lift the majority of its population out of near-poverty -- a population it needs educated and healthy to take on China.
The third is with the media. As per Dreze & Sen's An Uncertain Glory, among more than five thousand articles published on the editorial pages of India's leading English-medium dailies during the last six months of 2012, less than 1% of the total editorial space was dedicated to health-related matters, and that was with a very broad definition of "health-related matter". As we will discuss in more detail in a future post, the media really needs to spend more time on critical issues like health care, sanitation, and education.
In the book Life and How to Survive It, which I developed with Robin Skynner, we decided that the ideal leader was the one who was trying to make himself dispensable. In other words, he was helping the people around him acquire as many of his skills as possible so he could let everyone else do the work and just keep an eye on things, minimizing his job and the chaos that would come with a transfer of authority.
You want to prove that you're the best at managing an industrial farm at the back-end of agricultural supply chains, but you can't get enough of your team-mates together for a raising game of Agricola. Don't worry! Thanks to Z-Man Games, you can have a one-on-one game of Agricola: All Creatures Big and Small and out-farm your cube-mate to your heart's content!
Based on the original Agricola, All Creatures Big and Small was designed as a simpler alternative for only 2 people. (Even though the original could be played by 2 people, it was designed specifically for 3-5 players, and 62 of the occupation cards in the full game -- which we'll get to once you've had time to figure out the basic game which is more involved and complex than you think it is,just like the back-end of a real agricultural supply chain -- can only be used if there are 4 players.)
The 2-player game is simpler to learn than the full game (but just as hard to master, especially if you get the expansions). The number of actions you can take in each round are fixed, whereas the number of actions in the full game depend on the number of family members you have; the focus is on raising animals, building fences and stables to hold them, and other special buildings and you don't have to balance this with growing crops and producing food like in the full game; and there are no cards to deal with, only special buildings. It's quick to learn, but still hard to master because, as with the full game, only one player can take an available action and if you don't build your pens or stables in time, you can't breed more animals -- and while special buildings and farm expansions can give points, many of the points depend on the size of your flock. Plus, if you believe the game is getting too easy for you, there are two expansions: More Buildings Big and Small and Even More Buildings Big and Small that add a total of 54 more special buildings to make your game even more unpredictable, just like farming in the real world (as each building has an ability, just like each supply chain professional you could hire brings a different skill, and you can't build them all, just like you can't hire afford to hire too many people, so you have to find the right mix of buildings that give your farm that right mix of capabilities just like you have to hire the right mix of professionals in the real world with skills that complement each other and make the team as a whole greater than the sum of its parts).
In this 2-player version, you start the game with a farm board and a cottage that can hold one animal and 9 borders, which you can place when you select the fencing action, provided that you have enough wood to place those borders.
The game is played over 8 rounds and each round consists of 4-phases.
The available actions are:
Sounds simple enough, but, just like in Agricola, you're managing an industrial farm at the back-end of an agricultural supply chain, but unlike Agricola, you're only managing the stables. The amount of animals you can raise depends upon the number of separate pastures, stalls, and stables you have, how many troughs you have available, how many workers you have to build, how many resources you have available to put up fences and buildings, and how many special buildings you have that give your workers additional capabilities. And, as in the real world, winning isn't just profit, it's sustainability and depends on a number of complex factors that influence your performance over time.
Are you a better agricultural supply chain manager? Play All Creatures Big and Small and see if you can best your cube-mate, and when you think you've mastered it, switch back to the full game, break out the full version, and start preparing yourself for the ultimate supply management challenge (which this series is leading up to -- given that the majority of the market is still, depending on the analyst firm you ask, less than halfway up the ladder, we have to first give your peers a chance to take their supply chain game up a couple of rungs).
A recent article over on Inbound Logistics on Time-Critical Transport: Devising a Master Plan makes it sound like expedited or time-critical transport is still difficult or even needed regularly. The reality is that, for any Procurement and Logistics organization that is with the times and using the right technology, it's easy and rarely needed.
Traditionally, time critical transport was needed when something went awry in the supply chain and a shipment had to be expedited to prevent a disruption or stock-out that could be disastrous to a company's bottom line. Otherwise, unless you were talking about perishable deliveries on a non-refridgerated truck, proper planning mitigated the need for expedited shipment. This situation, of course, worsened with the introduction of JIT (Just in Time) Manufacturing and delivery in the supply chain, especially considering that not only have natural and financial disasters been on the rise since this paradigm became popular, but, as expected, so did disruptions as there were no longer weeks worth of buffer inventory to absorb a minor supply chain shock.
But if you have good visibility, proper planning, and the right tools at your disposal, whether or not you are JIT makes no difference -- the odds of a disruption being so significant as to require expedited shipping are low.
Specifically, if you have:
then you will be notified of potential disruptions well in advance and in time to take appropriate actions, and in the situation where it was an unpredictable disaster (such as a fire, earthquake, or flood) at your supplier's DC just as product was about to ship, and a new shipment has to be made immediately from another location, your immediate ability to secure a new truck almost always alleviates the need for an expedited shipment -- a need which is further alleviated by your ability to get your import, export, and compliance documents in order before the product ships, preventing unnecessary delays at the border.
Basically, about the only time you would have to do an expedited shipment is if you were a medical organ transport company and a new doner heart, needed halfway across the country, just became available. Other than that, with all of the options available to you to prevent the need for unanticipated shipments, or to get them under control as soon as the need arises, there just isn't that much of a need for time-critical transport anymore. (Unless you're still living in the eighties and using paper and fax to manage your logistics.)
An indicator of fraud?
As per a number of Sourcing Innovation posts, and a recent post over on Procurement Leaders on Procurement Fraud: A Shocking Wake-Up Call, procurement is a ripe area for occupational fraud. Outside of Accounts Payable, Procurement generally controls or influences the most organizational spend.
And not only is Procurement Related Fraud on the Rise, but it is taking place at 2 out of every 3 organizations -- many of which are even unaware of its presence! Furthermore, every organization affected by fraud is likely losing 2% of its revenues to fraud. Forget overpayments, duplicate payments, and other recovery audit targets that, even when extremely successful, aren't likely to recover more than 0.5% of your revenue in supplier credits -- especially when most of these overpayments can be prevented with good invoice automation. Fraud is the bigger uncontrolled drain on the average organization's coffers, and the issue that most needs to be attacked.
Fortunately, there are tell-tale signs of fraud, and if you regularly look for, investigate, and take precautions to prevent certain scenarios, the chances of fraud occurring in your organization will be significantly reduced. A number of these signs are succinctly summarized in Mr. Ashcroft's post on Procurement Fraud: A Shocking Wake-Up Call, referenced above, but it's the first four that really catch your attention.
All of these relate to sole-sourcing, which we all know to be a significant supply chain risk as a single disruption can wipe out an entire product line or category. Sole-sourcing should generally only be used when you are producing a new product which involves turning over a lot of proprietary knowledge to the manufacturer, proprietary knowledge upon which your competitiveness is dependent, or when the product requires a new type of technique that only one supplier can currently offer at an affordable price point. Otherwise, for supply assurance and risk mitigation, dual (or tri) supply should be used.
If something is being sole-sourced for which there is no good justification, then the sole-source arrangement should be carefully evaluated as the reason therefore could be fraudulent (or, if not fraudulent, unethical, as the buyer could be choosing that supplier simply because the supplier constantly gives the buyer free tickets to sporting events, free trips to industry conferences, etc.). And if any suggestions to change the supplier meet with unnecessary reluctance or insistence not too, that's an even bigger indicator that something could be happening under the table.
In other words, when you get right down to it, sole-sourcing is generally not a good decision. When you combine the opportunities it presents for fraud and disruption, the risk is typically too great.
Amazon wants to pre-package goods and ship them to a location near you in anticipation of your upcoming order (as per our recent post on how anticipatory demand planning is good, but anticipatory shipping?) It's an interesting idea, but the shipping companies are going to have to upgrade their systems to make it work (as per our recent post).
However, if you're talking about the Food & Beverage Industry, as per this recent article over on Inbound Logistics on Packaging Postponement: A Game Changer for F&B Companies, by positioning product packaging further downstream in the supply chain and closer to the consumer, food manufacturers can take advantage of different selling opportunities. If the product is selling better in a certain retail location, major restaurant chain, or even through a set of strategically-deployed vending machines, you want to get it where it's selling best in the quantity that can sell. This will generally require the right packaging, since a vending machine portion will generally be smaller than a store portion which will be smaller than a restaurant portion as the restaurant will order in bulk to prepare in bulk.
Packaging is a conundrum. But do you even need packaging at all? (At least at the individual product level.)
Let's consider the Amazon situation. Do they even have to package the products they are shipping in bulk at all? While it's true that they are not a traditional store where you can walk in and pick up the item, this doesn't mean that you can't walk in to a "store" and pick up the item. Nor does it mean that you need packaging to affix a shipping label.
Consider Amazon's expanding Locker service. If a good is placed in a locker, it doesn't need a package. Neither does any good placed in any neighbouring locker. All of the goods going to the lockers can be shipped in a single "package", and then put in the appropriate lockers. But the "package" doesn't have to be a package -- it can be a reusable shipping container. Then there's no packaging, no waste, and shipping is on its way to becoming a sustainable business.
Basically, Amazon can re-invent the mail-order model developed by Sears, Roebuck & Co. where "mail-order" is replaced by "e-mail order" and "counter pickup" is replaced by "locker pickup" and bring back the "reusable crate", only this time it's probably a "eco-friendly heavy-duty plastic crate" that will last much longer.
And while you might think that this concept cannot be translated to Food & Beverage, challenge that notion. The Bulk Barn's entire business model is built on bulk, package-free, purchases. And all of the food and beverage products they sell can be shipped in reusable containers. (Now, I know it doesn't work for liquids in the current business model*, but it works fine for most dry goods.)
What's the point? You can package when, where, and how you want, but first think about whether you even have to package at all, and, if you do, if you can use re-usable shipping containers. Environmentally friendly and cost-effective, it will save you money and image points on an ongoing basis.
* But even then, we can bring back the classic milk delivery model where you return the reusable models, but update it such that you pay a high deposit each time you buy a reusable bottle, which is waived each time you return a reusable bottle, just like the eco-conscious micro-breweries are doing.
Sanitation in India is a major problem. The fact that India is 13th among a list of the 16 countries outside of sub-saharan Africa that are poorer than it in the rankings does not do the severity of the problem justice. As we noted in our post on Poverty, in India, 55% of households practice open defecation. In comparison, in Bangladesh, which has half of the GDP of India per capita, only 8.4% of the population practices open defecation.
Moreover, only 88% of the population has access to an improved (clean) water source (for drinking). In rural areas, the statistic is even worse -- 84% (compared to 96% in urban areas). That's 16% of the population without even access to clean water. For an emerging country, this is a disgrace. In China, a country with three times the land area, the statistics are 98% and 85% (and 91% overall). Why is it so bad? Well, for starters, as of 2010, only two cities in India -- Thiruvananthapuram and Kota -- get a continuous water supply (which is a situation that needs to change).
This is a huge problem. Even worse than the health care situation. When you get right down to it, if more people had access to sanitary conditions, communicable diseases and infections, which account for a percentage of deaths that is (at least) 20 times the percentage of deaths that communicable diseases and infections should account for, wouldn't be so widespread. (People can't die from a communicable disease or infection they don't get, and the number one way to stop the spread of communicable diseases and infection is better sanitary conditions and sanitary practices.) With respect to diarrhoea, 88% of deaths occur because of unsafe water, inadequate sanitation and poor hygiene.
Sewerage, where available, is usually in a bad state. In Delhi, for example, the sewerage network has lacked maintenance over the years and overflow of raw sewage in open drains is common, due to blockage, settlements and inadequate pumping capacities. The capacity of the 17 existing wastewater treatment plants in Delhi is only enough to process about 50% of the waste water produced. Across India, the most recent estimate (in 2003) was that only 27% of India's wastewater was being treated, with the remainder flowing into rivers, canals, groundwater or the sea. Abysmal!
Just how bad is the situation? Consider this passage from Wikipedia:
For example, the sacred Ganges river is infested with diseases and in some places the Ganges becomes black and septic. Corpses, of semi-cremated adults or enshrouded babies, drift slowly by. NewsWeek describes Delhi's sacred Yamuna River as "a putrid ribbon of black sludge" where the concentration of fecal bacteria is 10,000 times the recommended safe maximum despite a 15-year program to address the problem. Cholera epidemics are not unknown.
Plus, the continuing depletion of ground water tables and the continuing deterioration of ground water quality are threatening the sustainability of both urban and rural water supply in many parts of India. India can't afford to pollute any more of its water supply and needs to get waste water treatment under control rapidly. Otherwise, health care problems are just going to get worse, and the repercussions will be substantial.
CFO World recently published a short piece on ending the dash for cash in which they outlined then steps to success that an organization can take to help shrink working capital in which they got it all wrong.
Good working capital management doesn't shrink working capital, it enlarges it. So, in the spirit of Mark Perera's Nine Rules for Stifling Supplier Innovation, Sourcing Innovation gives you nine rules for insuring that you will eventually have to dash for cash to keep your business afloat.
Follow these rules and I ensure you that, sooner or later, you will be making a dash for cash.