30/10/2018 12:55 | Share
NextWave Plastics members commit to expanding sourcing of verified ocean-bound plastics from the countries hardest hit by marine plastic waste.
30/10/2018 12:54 | Share
If you’ve been keeping up to date on our ongoing blog series, you know why we’re all zombies. The reason, simply put, is that, instead of Procurement recognizing that it was supposed to be dead and buried two years ago, and maybe rising from the ashes, it has instead continued along in an undead fashion. Each day, we go through the same motions, using the same processes, on the same old platforms. Platforms which, according to the visionary consulting firms and platform providers, were supposed to solve all our problems and release us from this tactical nightmare. Instead, they have done nothing to ease our woes and, in many situations, have made them worse!
Not only are the majority* of platforms still based on last decade’s processes, but they aren’t even making them easier. In essence, they are fueling the Procurement zombie nation and they should be ashamed of themselves.
To understand how, let’s consider our average Monday morning, as documented in iZombie: A Prelude Part I, and how a modern platform would have prevented us from wasting four hours of our day.
First of all, it takes you five minutes just to judge how many emails are from each type of project stakeholder. A good platform with integrated communications would give you that information in 5 seconds, with communications already arranged by urgency and seniority (based on your organizational structure and derived from your typical review patterns).
Secondly, the modern system with the integrated cognitive monitor would immediately detect that an email didn’t go out because it didn’t have the new SSL certificate, invoke the process to download the SSL certificate, and send the email again.
Thirdly, you never would have gotten that call from your widget supplier because:
- as soon as the invoice was marked “DO NOT PAY”, you would have been alerted, known of the issue, and marked it for “monitoring”
- as soon as it was past due, you would have followed up with Engineering, who would have said “yes, we got the shipment, it’s in the system”
- you would have searched for all invoices with similar products, found one for the proper product, noticed the invoice ID was miskeyed, fixed it, and sent Finance an e-mail to remove the “DO NOT PAY”
- the invoice would immediately enter the payment queue, and the supplier would be notified on their portal
- it would have been paid on the next payment date, 7 days in the future, and 23 days before you got the angry screaming call
and all this would have taken you 10 minutes a month ago, instead of almost an hour now!
But now the biggie — because of your antiquated platform, it took you 3 hours to construct a project overview report that summarized the status on all the key projects, issues, and actual/projected vs. budget. A modern platform would automatically track all those metrics, allow you to record issues as they arrive and tie those metrics to issues, and then, when a summary report is created, automatically pull the issue summary and status into an appendix.
A modern sourcing platform would come with a customizable template that you could customize in 15 minutes and (schedule to) run, as needed, saving you hours of work compiling all the information that is already known, and linked. The only thing you should have needed to do was edit the executive summary to contain a few expert notes on the situation and expectations based on team dynamics and broader organizational knowledge the system didn’t capture. In other words, your three hour effort should have been a 30 minute effort that started with a 5 minute scan of the auto-generated report, a 20 minute edit and augmentation of the executive summary, and a final 5 minute proof.
In other words, the work that took you four (4) hours and 15 minutes should have taken you about 35 minutes. And that’s only because one of the reports was being presented to the C-Suite and needs a human touch and review.
But because the average amoeba has more “artificial intelligence” and “automation” than an average Procurement platform, you had the privilege of spending yet another half workday as a Procurement Zombie.
* A few providers are actively working towards the key next generation capabilities we outlined in our * series, but the majority of platforms on the market today are still based on processes and capabilities innovated a decade ago. In internet time where even the largest provider will roll out bug fixes, patches, and minor updates on a quarterly cycle, that’s a professional lifetime!
30/10/2018 12:54 | Share
As we stated yesterday, we’re all zombies. Procurement is continuing along in the most undead fashion possible, going through the same motions day after day like a clockwork automaton of the 19th century. The platforms that the visionary consulting firms and platform providers were supposed to provide us by 2020 (less than 15 short months away) have not materialized and we are stuck in a tactical nightmare. Which is about the worst kind of nightmare.
We’re dead serious about that last part. If you consider the most common bad nightmares — being naked in public is only going to embarrass you at most once (and not at all if you are a nudist), a broken bone will heal, a fall just wakes you up, we’re all cheated, we’re all interested in the unknown, we probably know or believe ghosts aren’t real (or probably can’t harm us), many spiders are more scary than dangerous, teeth fall out when we’re young to regrow, danger is always present, we will eventually be late for something because Murphy’s laws tell us sh!t happens, people are always trying to steal our IP, we all fell like we’re drowning in the modern world (of work), it’s easy to be lost in the big picture, and we all get fed up of loved ones sometime — I think the living nightmare of doing the same thing day after day expecting a different result (which is the definition of insanity by the way) is the worst of all. And, remember, you can always wake up from a nightmare. You can’t wake up from the zombie state modern platforms have put us in.
But it could be better. In our last post we indicated how a modern platform could have saved over 80% of our time with simple capabilities that really should have been in every platform for the past five years.
But would this be the case in general? Would a modern platform really eliminate 80% of our entire workload? Let’s run through the rest of the day.
We return from lunch to our stakeholder meeting. Now, it’s true that no platform can eliminate the meetings and you’re still going to lose that time to a degree, but with the right platform, you can make meetings more productive.
With a good platform, the customer success rep would see that her peers were happy with the supplier’s performance and that it was improving and that her customers were next to get the replacements. She’d still be unhappy, but well informed and willing to wait until the next shipment before taking her final position.
The finance rep would already know why you disqualified the lowest bidders. Any discussion could thus be focussed on the question as to whether or not one of the lowest bidders could be improved to a level of acceptability over time versus an inquisition as to why the bidder was eliminated.
The engineering rep could see all the cost models and the savings projections over time and understand the issues everyone (else) has with the incumbent.
And the marketing rep would know that while you want suppliers with exciting features, there are critical requirements that need to be met in order to keep production lines going and shelves stocked. And those needs must come first.
Instead of thirty minutes of complaining, ranting, and basic Q&A before you can get down to meaningful discussions, since all the stakeholders have insight into all the facts, you can get down to real discussions and debates. It may not be productive, but at least you skip addressing the stuff you should already know.
And then there’s the issue of the meeting conclusion — more suppliers are needed and that’s another discovery project that you estimate at 20 hours or more. But if you had a modern discovery platform with deep intelligence and match capability, it would not be a 20 hour project, it would be a 2 hour project — at most. The first phase would be like 20 minutes, and you could slip out and do it on a break.
But anyway, because it’s not something you can make any progress on today, you move onto supplier emails and that’s where discover that your steel shipment didn’t ship yesterday and you need a replacement in 21 days or your production line is going down. And you spend an hour and a half trying to find a substitute. With a good platform, you know all of the suppliers that provide a similar or substitute product, which are under contract, and what the last bids were. You can start calling them immediately, and likely find a replacement supplier in three calls and 30 minutes, not 90 or more.
And let’s not mention the 40 minutes you waste reviewing emails that ask questions that could be answered in a good supplier portal or automatically answered by a chatbot.
It’s almost five before you get down to the project work. The platform won’t save you the time required to answer technical supplier questions, the time to manually score an RFX, or the time to figure out why suppliers aren’t bidding, but you’d get to it about 5 hours earlier in the day!
And when you accomplish something by noon, versus working to seven and accomplishing nothing, you find your headaches are a lot less and you don’t need to pop quite so many painkillers.
30/10/2018 12:54 | Share
Ten years ago, by far the best presentation at the 41st Annual Supply Chain & Logistics Canada Conference on Creating a Resilient Supply Chain was Jim Tompkins’ (CEO of Tompkins’ Associates) presentation on Bold Leadership for Organizational Acceleration. (He also gave the keynote, which was a great presentation as well, but this was one of the best presentations the doctor‘s ever been too in his years and years of sitting through supply chain and logistics presentations.)
Not only is Jim a great speaker, and if you haven’t heard him, I encourage you to attend his session the next time you’re at a conference where he is speaking, but he’s also really good at telling it like it is. Really, really good. And in this presentation, where he gave his top three tips to bold leadership success, he didn’t pull any punches. In reverse order, his tips were:
- Don’t Do Anything Stupid,
- Focus, and
- Kill the Left-Suckers.
And I couldn’t agree more! What’s a left-sucker you ask? It’s someone who can’t do his job, and pulls his manager away from doing what the manager is supposed to be doing to help the individual who can’t do his job. Why is this so bad? Isn’t that what managers are for? Well, managers are there to help, to teach, and to guide — but they’re not there to do their subordinates’ jobs. When managers are consistently pulled away from their jobs, they don’t get their work done and then their directors have to step in to pick up the slack. When the directors get consistently pulled away from their jobs, they don’t get their work done and then the (rest of the) C-Suite (in a smaller organization, where left-suckers can suck the life out of a company before you know it) has to pick up the slack. When the C-Suite has to pick up the slack, they aren’t getting their work done, and then the CEO gets pulled into fire-fighting on a daily basis — and instead of the CEO leading the C-Suite in setting strategic direction, and the firm in building the business, she’s bogged down in tactical execution while the company starts burning down around her.
As Jim says, a CEO should have three hours a day to do nothing but focus on the strategic. She needs to think about what the company is doing, what they should be doing in the short and long term, and how they are going to get there over the required time period to either reach the top or maintain their place on the top. If she’s consistently being pulled in half-a-dozen directions, that’s not going to happen. So you need to make sure that it does — by identifying, and eliminating, the source of the problem — the left-suckers!
If you can train them — great! If you can find them another role that they can do — that’s good too. But if you can’t train them, or find a role that they can do without constant supervision and hand-holding, or you just can’t make them happy, then you have no choice … you have to terminate them. Or they’ll terminate your company. (You can slowly phase them out, but they have to go. And the phasing starts the minute you identify there is no converting them.)
Bravo, Jim. Bravo!
30/10/2018 12:54 | Share
There are two schools of thought out there when it comes to catching up with crushing workload and/or crushing customer demand (which may only be seasonal).
ONE: Consultants are parasites that charge ridiculous rates, waste precious time, and present obvious conclusions so you should hire the minimum number of FTs you need to “get by” with everyone working crazy over time until things settle down.
TWO: FTs are expensive. They demand benefits. They take fixed overhead. And, if they don’t work out as well as you’d hoped or demand drops, in many locales, you can’t just fire them, or even if you can, you have to give them severance and long-term health-care or other benefits or you can be sued or fined. So just hire third parties. Sometimes consultants, but usually service organizations (who likely employ contingent workers, but not highly skilled consultants).
Both of these schools of thoughts are wrong. Why? In the latter case, for the right job descriptions, FTs are the best resource to have as they build organizational knowledge and get more efficient over time. (But not all jobs fall into the right categories.) In the first case, while consulting does draw some of the sleaziest individuals out there, it draws less than highly demanding sales jobs or executive jobs (that statistically often have more psychopaths than law firms and media organizations). The majority of consultants want to deliver ROI. The only question is how far out of their “comfort zone” can the consultant deliver the ROI you want. (But that’s the beauty of using consultants, you can find specialists for each problem you need solved and guarantee an ROI – more on that below).
As you know, the doctor won’t pay two bits for traditional rhetoric and likes arguments that are backed up with facts and numbers. So he’s going to remind you of the nice little calculations that he presented a decade ago about why you should hire consultants to not only help you with your problems today, but help you design better processes to be more efficient, profitable, and less reliant on contingent help or consulting for repetitive tasks on a regular basis tomorrow.
First of all, we need to cost a top performer.
- A top performer demands a high salary.
Usually 200K to 300K for a high-performer. Let’s say $250K.
- A top performer demands pricey benefits.
Health insurance (10K+), life & disability insurance (5K), 401K matching (10K), and a performance bonus of at least 10% to 20% (25K to 50K) in a good year. This will cost you another 50K to 100K. Let’s be very conservative and say 50K .
- A top performer comes with overhead.
First off, there’s all the standard overhead of maintaining the nice office, the telecommunications equipment, and the IT equipment. There’s also a share of an administrative assistant’s salary, a transportation budget, and a reasonable expense account. This could easily eat up 25K to 50K (or more). Let’s be moderate and say 30K.
- A top performer needs a decent vacation to recharge.
Depending on how long this performer has been with the company, we’re probably talking 4 to 6 weeks. This is a hidden cost, as it means you’re only getting 46 to 48 weeks of work, at most.
- A top performer needs to keep his skills up to date, and this will require good training.
You should allow at least two weeks for any employee. For a top performer, I’d highly recommend three or four weeks of training and education related activities. Let’s be conservative and say this person is an extremely fast learner and you can get away with two weeks. Now your top performer is only working 44 to 46 weeks, at most.
- Training costs money.
Whether it’s courses, workshops, conferences, or self-study guides, expect to shell out for this. A couple of conferences and a couple of courses could easily run you 15K to 25K to keep your top performer at above average performance levels. We’ll be realistic and say 20K.
- There will be other costs that arise with respect to raises, promotions, recognition, and performance.
However, since you can always make them next year’s budget problem, we’ll ignore them for simplicity.
This says that your 250K top performer, that you believe is only costing you approximately 1K a day is actually costing you over 1.6K a day in a conservative estimation, and possibly over 2.1K in reality. (350K to 450K+ over 220 days, vs 250K over 260 days)
This is pretty damn expensive. And while it’s still less than a top consultant, who will charge you 4K to 40K a day (depending upon how much market intelligence she brings with her and how much of that valuable IP she is going to perpetually license or give you), we cannot forget the following:
- Your top-performer will have most of his or her time consumed with the tactical day-to-day operation of the business.
- If your top-performer is struggling to complete two weeks a year of training or education related activities, he or she is not going to be up to date on new ideas, technologies, and movements within the marketplace.
- If you’re starting to run into stiff competition or problems within your business, you can be too close to the problem to make good, objective decisions.
- Even a top-performer can only be an expert on a handful of technologies, processes, or business functions. At least collectively, outsiders will always know more about the best way to run your business with today’s technology in today’s market than you do.
- It’s an innovate-or-die marketplace out there today. And if we’re in a recession, that’s doubly true.
- A consultant can focus purely on the strategic, and purely on the problems you need help with.
- A consultant will spend a considerable portion of his or her time keeping up to date on new processes, technologies, and advancements. Their knowledge is there to be used.
- A consultant can be much more objective. Furthermore, a consultant probably has a better comprehension of the state of the market you compete in than you do.
- Even though, like any top performer, a consultant can only be an expert on a handful of technologies, processes, or business functions, you are free to pick the consultant with the skills you need to advance your business.
- When a consultant puts in a day, a consultant puts in a day. Usually 10 to 12 hours, compared to the 9-5 with a 2 hour lunch an employee will often try to get away with when he or she can. Plus, a good consultant can’t stop thinking about your problem until she goes to sleep at night, and usually starts thinking about it the minute she wakes up.
- Consultants live by the innovate-or-die mantra.
and, most importantly,
- When the project is over, you can cut the consultant loose without any additional cost. In contrast, it could easily cost you six figures to cut a top-performer loose. Furthermore, if you’re smart and do a short initial engagement with a new consultant before agreeing to a long term engagement, the loss associated with hiring the wrong consultant is next-to-nothing. In comparison, the loss associated with hiring the wrong person for a director or vice president job will be hundreds of thousands by the time you add up the losses with dismissing the current employee, finding a replacement, and getting that replacement up to speed.
So, given that a consultant can bring you the badly needed 1) expertise, 2) objectivity, 3) credibility, 4) leadership, and 5) time that you need to be successful, don’t balk at standard consulting day rates. It’s a bargain compared to the value they can bring, especially when you remember that it’s not tactical day-to-day operations that bring you substantial cost savings and new markets, but strategic improvements that consultants can bring with them.
Let’s say with your current Sourcing / Source-to-Contract / Source-to-Pay platforms, your top buyer can only do 7 major sourcing events (10M + a year) a year which garner an average negotiated savings of 6% (and the total spend under her purview is 100M), which typically result in an average realized savings of 4%. That’s not a bad ROI in this particular situation, given that your organization just saved 4M on a fully burdened superstar that cost you 400K, a 10 to 1 ROI. In fact, you’re probably saying to yourself — how could a consultant beat that.
Let’s say you brought in a powerhouse consultant for a 6 week process evaluation, strategic realignment, and platform redesign project who, for a modest fee of 300K helped you design new processes and select new systems that, when fully implemented a year later, allowed this same senior buyer to handle 15 major sourcing events a year representing 180M worth of spend (not unreasonable at all — some modern platforms and processes take events that used to take 3 months of buyer effort a year ago down to 3 weeks) and identify an average negotiated savings of 8% (and then realize 6%). In other words, 300K of consultant time allowed your top buyer to go from saving you 4M a year to 10.8M a year. Even if you gave the buyer a 20% bonus, 300K more than doubled your ROI from that buyer even after subtracting the 300K for the consultant (as the ROI went from 10 to 1 to 21 to 1). That’s FRAKING cheap! So next time a top consultant proposes to help you, ignore the top line. It’s only the bottom line that counts.