Should Your Fleet be Driven by Data?

on Friday, May 30, 2008

Should Your Fleet be Driven by Data?

Seems like everyone in fleet management circles is talking about telematics systems, the diagnostic software, wireless telecommunication, and location tracker packages that churn out data that can be used to slash costs and improve service and environmental performance.

Three recent articles are worth looking at:

cio.com tells how the telematics program at UPS grew from a desire to make sense of the wealth of data that originates in the company’s brown trucks -- in, for example, sensors that measure vehicle speeds, RPMs, oil pressure, and seatbelt usage. One result of UPS’s program has been a cut in idling time by 24 minutes per driver per day -- a fuel savings UPS estimates at $188 per driver per year.

Work Truck Online asks if telematic systems provide a good ROI and answers “yes.” According to PHH Arval, a provider of commercial fleet management services, most companies can realize a ROI with telematics in six months to a year.

Fleet News discusses how Eagle-I, a UK provider of integrated telematics services, deals with the dreaded “death by data” with which a company with a productive telematics system can be overcome. The article also offers a reasonable ten-point guide for selecting a telematics supplier.
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Measure Twice, Cut Once

on Thursday, May 29, 2008

It’s all in the preparation, right? So, if your organization is looking to Lean Six Sigma to improve, say, supply chain effectiveness, Bain & Company suggests that you first perform some upfront diagnostics to make sure you’ll get the improvements you’re after.

In a Bain survey of 184 companies, 80 percent indicated that their Lean Six Sigma programs did not lead to the anticipated value. While companies such as General Electric, Dell, Xerox, and Johnson & Johnson have used Lean Six Sigma to their advantage, many of these other companies actually found that their teams of Lean Six Sigma experts (“black belts”) actually slowed down performance improvement efforts.

One of the key problems Bain identified was the failure of management to identify improvements that would yield the largest results – particularly when the high-impact problem areas were not obvious. Too often, companies give their team of black belts leave to attack all problems in an undifferentiated, unprioritized manner.

Bain prescribes a three-step “diagnostic x-ray” to be performed by a small team of black belts to identify key opportunities for improvement. The steps are:
  1. Enterprise Value Stream Mapping, mapping an enterprise’s primary processes to uncover the largest opportunities to reduce cost by reducing wasted time and materials
  2. Benchmarking, measuring the performance of processes against internal and external benchmarks to measure shortcomings and to set performance improvement targets
  3. Prioritizing, identifying the process improvements likely to yield the greatest results when the Lean Six Sigma methodology is applied

Bain offers case studies of four companies that took this thoughtful approach to Lean Six Sigma implementations, including one whose diagnostic x-ray showed the company had too many suppliers and whose Lean Six Sigma work resulted in 40 percent improvement of inventory in two years.

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Where are the Leaders?

on Wednesday, May 28, 2008

Yesterday I wrote about rising energy costs and Congress' inability to develop a long term energy policy. I was happy today to hear the scathing words from Dow Chemical about the cost of energy and the failure of Washington to develop an energy plan. Dow is raising prices by up to 20 percent--that is a really big price increase.

Andrew Liveris, Dow's CEO reported that first quarter feedstock and energy costs were up "a staggering 42 percent," putting strains on the company and its relations with customers. For most chemical companies, price increases have failed to keep up with raw material increases. He went on to state that:

"For years, Washington has failed to address the issue of rising energy costs and, as a result, the country now faces a true energy crisis, one that is causing serious harm to America's manufacturing sector and all consumers of energy. The government's failure to develop a comprehensive energy policy is causing U.S. industry to lose ground when it comes to global competitiveness, and our own domestic markets are now starting to see demand destruction throughout the U.S."

It takes people like Liveris to take the lead and confront issues head on. In many companies, leaders are hesitant to deal with the status quo and they let business as usual rule the day. When you are unable to pass price increases on (like Dow Chemical), look to control costs. Are your costs in line with you peer group? How do you know? Can your costs be better than your peer group? Yes they can.

Source One's proprietary database of commodity costs spans 15 years and hundreds of commodities. We can quickly identify areas that have the potential for savings. When there is upwards pressure on direct materials, savings in areas like freight, packaging and indirect materials may provide potential offsets. Be like Liveris and challenge the status quo. Today it is not "Business as Usual" anymore.
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Depressed About the Economy? Go to the Movies.

on Tuesday, May 27, 2008

Indiana Jones captured moviegoers across the globe this holiday weekend, raking in a record-setting $311 million worldwide. This occurred as rising gasoline costs and falling home prices made Americans nervous about the future according to a survey by the Conference Board that showed consumer confidence plunged to its lowest level in 16 years.

One might expect that consumers would be protesting inaction by government officials rather that sitting in the movies. The White House and Congress choose to point fingers at speculators and the oil companies when a national energy policy is needed. Even with all of the concern surrounding energy prices, no comprehensive long-term energy policy has been proposed.

When managing spend, do you have a plan, are you pointing fingers or are you living in a fantasy world? Strategic Sourcing can provide the plan, tools and techniques to help you control your spend and take actions to keep costs in line even in the face of rising commodity prices. Costs are rising for everyone. Market leaders will develop plans and strategies to keep their costs lower than competitors enabling them to capture greater market share even in these volatile markets.



Don't follow the "leaders" by pointing fingers or looking the other way. Be the leader and take action. If you don't have the market expertise in house, get the help of a procurement service provider that can bring the tools and subject matter expertise to keep you ahead of the competition.
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Wireless Management: PATIENCE!!!!!

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This should probably conclude my exciting series on wireless management, save for a few bits and bobs I may have forgotten or other concerns that may arise. I’m just as sad as you, but I’ll find other spend categories to rant about.

The final word when dealing with wireless providers is patience. I’ve worked on quite a few wireless projects for various clients in various industries and there has only been one team I’ve come across that was exceptionally responsive to the client’s needs. I’ve had a few who were marginally responsive, which is usually the best you can hope for. I’ve had other wireless teams that were just abhorred. I recall for one project I sent recommendations for plan changes in June and nothing was acted on until October, in spite of monthly invoice audits reminding them nothing has been done. That was a fun project.

I haven’t worked on the inside of the wireless world (thank god), but what I hear from reliable people, there are several reasons for the lack of care and responsiveness.

Sales: Wireless is a sales driven business. Once a provider gets you to sign a two year deal, they have you. Odds are you’re not going to change providers in mid-contract and take a huge hit on all the ETFs. Once a rep gets one contract signed, they’re on to the next one.

Turnover: This one is self-explanatory. Most sale-intensive fields have high turnover rates. If you’re not good at selling and you’re not making money, you’re going to jump ship pretty soon. This happens quite frequently in wireless. Also, there are many subordinates and call center people who might help out on your account, and those positions are also subject to high turnover rates.

Team Reshuffling: As a result of turnover, to fill in voids left that can’t quickly be filled, people may shift from wireless team to wireless team. Also, reps with a large workload may be needed to take on additional responsibility, so they don’t have time to attend to every account the way you would want them to.

I’m sure there are other reasons. I’m an eternal cynic of the wireless world and I could spread some nefarious theories, but I won’t. The bottom line is any major reshuffling of your wireless profile, anything from plan changes to consolidation to transfer of ownership, takes time. Even something seemingly simple as sending your wireless rep a spreadsheet of voice plans to change can routinely take at least two months; one month to get the bulk of it changed, then another month to fix any mistakes made.

Another word to go along with patience, which can seem like a contradiction, is persistence. Sending an email to request some changes and then assuming they got taken care of or waiting for the rep to send an update will get you nowhere. Stay on top of your rep, but try not to get ticked off when in spite of being on your game, your rep isn’t. These things take time. It’s not just you, believe me. Many, many, many people have shared in your frustration. It’s worth the effort, however, and the savings will be proof. Good luck.
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When Life Gives You Lemons, Make Lemonade—But Be Sure to Stack it Chimney-Style

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Time magazine and Logistics Magazine recently highlighted work that the design firm IDEO has done in supply chain management. It’s always worth knowing what IDEO—a company that, for 30 years, has brought innovation to the innovation business—is up to, so take a look at both articles.

The Logistics Magazine is particularly worthwhile—a good, brief account of how IDEO helped put a client, Kraft Foods, on the road to supply chain optimization.

And also look at IDEO’s own description of a simple move—changing the way boxes get stacked on pallets—that led to a 162 percent increase in sales for Kraft Capri Sun Lemonade at one of Kraft’s supermarket customers, Safeway.

It’s upon that kind of simple, “how come nobody ever thought of that?” innovation that IDEO has built such a huge fan base.

For more, get hold of a copy of Tom Kelley’s The Art of Innovation, an easy-read book that will take you through IDEO’s history, philosophy, and accomplishments.
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Become a Sponsor of WhyAbe.com

on Friday, May 23, 2008

Source One is announcing open positions for banner advertisers on its e-sourcing platform, http://www.whyabe.com/

Now is your opportunity to secure exclusive advertising rights in a no-hassle simple way to get in front of thousands of buyers and suppliers.

Click Here to View our Sponsorship Rate Card

This opportunity is ideal for solution providers that offer robust e-procurement platforms and technologies.
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The Untouchables

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Hands off travel expenses, right? When you gotta go, you gotta go—and it costs what it costs.

But, as Steve Belli’s post below (Profits, Inflation and Recession) tells us, now’s a good time to apply sourcing smarts to categories to which your company may not be paying sufficient attention.

And that might mean making better decisions about travel and meeting expenses.

In its second annual Strategic Sourcery procurement practices survey (released Monday at the Association of Corporate Travel Executives Global Conference and Corporate Travel World), American Express Business Travel reports that procurement is getting into the travel business at a growing number of companies.

“Travel is increasingly viewed as an investment, rather than a commodity to procure, and the partnerships and shared strategies created between procurement and travel departments are instrumental in maximizing the value of corporate travel and entertainment budgets,” says Frank Schnur, Vice President of Consulting for American Express Business Travel’s Advisory Services.

American Express also reports a rise over last year in the number of companies surveyed that are using strategic sourcing and other procurement best practices for savings on meetings management expenses. And for companies where meeting and events costs are escaping the attention of procurement professionals, the Aberdeen Group, in a report titled Strategic Meetings Management: Of MICE (Meetings, Incentives, Conferences and Exhibitions) and Spend, suggests two possible reasons: lack of attention and fears about organizational politics.

Contact Source One For help with Strategic Sourcing Business Travel Spend.

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Wireless Management: Features Smeechers

on Thursday, May 22, 2008

Clean-up time! Break out your broom, disinfectants, rubber gloves, mops and buckets. Now that you’ve collared all your employees’ phones and created a more cost effective pool of minutes, you’ve got one more ugly beast to slay: line features. Line features are additional services charged on a monthly recurring basis, such as text messaging, handset insurance, mobile web, etc. Most people don’t need these features to conduct business. I’ll pick out the usual suspects first.

Insurance: Most wireless providers will charge about $5 per month to insure your phone, so if it breaks, you can get a free replacement. On the surface it sounds good, but it’s really a rip-off, especially for executive phones.

Let’s do some math. Assume you have 100 phones, 20 have insurance for $5 a month, and the average cost of a new phone is $100. Those 20 users will be paying $60 a year for their insurance, or $1,200 for the company as a whole for the year. That means you have to break and replace 12 phones to break even. Do you see how unlikely that is? If the phones are used in construction, it’s a different story, but for salesmen, executives, office-dwellers, it’s a $5 per month donation to your wireless supplier. Drop the insurance and eat the replacement charge when it happens; you’ll end up on top.

Text Messaging Plans: This is another common feature. It’s also common to see someone with a 500 message plan for $5 who sent three text messages that month. If those texts would have cost $.15 each, you’re in the hole $4.55. Multiply that by 20 users per month and that’s $1,092 a year good ‘ole Mr. Wireless Provider shook you down for.

On the flip side of that, you may have a user who has no text plan and is sending 600 texts a month and is receiving 400. On Verizon, who charges $.10 per sent and $.02 per received, that’s $68 just in texting for that month. If that’s average usage, you’re paying $816 a year just for that user, just for text messaging. When you see someone texting that much, the concern isn’t just the cost, but if they’re texting that much, are they even working? Dig in deeper on that. A few texts a month on a corporate device is no big deal, but texting like a 14 year old girl is crossing the line.

Pay-Per Services: Although technically not features, this is worth addressing. 411, or directory assistance, can be abused. These calls typically cost $1.45 per. I’ve come across invoices where some users make 20 411 calls a month. Why do they need to make that many calls? Maybe they do. Maybe they lost a client’s number on their way and had to call. But maybe they were calling to get the number of a favorite take-out joint for lunch. Ask what the need is. If an employee can’t justify abuse of this service, this capability can be deactivated from the phone.

Media downloads are another point to address. No one should be downloading ringtones, games, music videos, or anything like that on a corporate phone. It’s unacceptable. A good wireless policy would state that any cost incurred as a result of these downloads will be billed back to the employee.

Odds and Ends: There’s a whole slew of other features; detail billing, mobile web, various data plans. I’ve seen people pay monthly to have a caller ID feature, but their phone had caller ID. The reason is their old phone didn’t have caller ID, so they paid for the feature, but when they got a new phone, they never made the change and probably didn’t even know better. I saw a user with a NASCAR Racing Connection packet. The company was paying for this! Of course they didn’t know they were, but that’s a good example of what’s out there when you take some time and scratch below the surface.
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Fast Supply Chains Always a Good Fashion Statement

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What good is a CFO with solid supply chain credentials?

That’s exactly what you need if you’re a company that, like fashion retailer Benetton, finds itself faltering, described by one analyst as unable to “tap into trendiness” while competitors’ pushed products to market on well-greased supply chains.

An interesting article from CFO Europe Magazine tells how Emilio Foà, the formerly of Burberry, is helping to turn Benetton around.

At Benetton, much of Foà’s attention focuses on such supply chain issues as accelerating lead times and moving from local (Italian) suppliers to offshore facilities and outsourcers in low-cost countries.

But that second change is not without its challenges. “You definitely have benefits in terms of lower costs and being closer to markets, but by the same token you are buying higher risk—country risk and currency risk,” says Foà. “And you are getting into a more complex and more costly flow of merchandise around the world.”

Foà developed his supply chain skills at Burberry as head of Project Atlas, a five-year IT and supply chain transformation effort. Even so, Foa says, “I'm not a supply-chain expert by any means…. But I do have the right level of knowledge to raise the right questions.”

Things seem to be heading in the right direction. Last week, Benetton reorted a 9 percent rise in first-quarter core profit.

Read the article, too, for the sidebar in which Foà draws a useful distinction between financial data and financial information.

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Is Everyone Going to Stay Home?

on Wednesday, May 21, 2008

Oil crossed $132 a barrel today. $4 gas is coming to a station near you. Can you afford to leave home anymore?

Airlines are feeling the pinch. Financially strapped airlines are cutting service, and nearly 30 cities across the United States have seen their scheduled service disappear in the last year, according to the Bureau of Transportation Statistics. Some of the cities without air service are: Hagerstown, Md; New Haven, Conn.; Wilmington, Del.; Lake Havasu City, Ariz.; and Boulder City, Nev.

Over the next year, air travel costs are expected to increase dramatically as jet fuel hedges expire. Most people are feeling the pinch as they fill up their cars each week. Rising fuel costs are spilling over into every area of the economy - from food prices to clothing.

What can you do to cut your fuel bill? Try to build an infrastructure where people can work from anywhere. Many information and office workers can perform most of their work with an internet connected laptop and a cell phone. Reduce travel time by letting people connect from home. Use software to hold on line meetings to reduce air travel. Future success will require a work from anywhere at any time mentality. Stay competitive - cut your fuel consumption.
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Profits, Inflation and Recession

on Tuesday, May 20, 2008

We have a phantom recession. Are we in one, going into one or it's not going to happen? Is inflation out of control? What will happen to corporate profits?

If you listen to the government, everything will be OK. We are only in a slowdown. Prices are not out of control. The credit crisis is almost over.

If you go to a gas station, into a store, try to sell your house or talk to your suppliers, you will hear a different story. The price for everything (except housing) is going up. Goldman Sachs estimates that oil will hit $200/barrel within 24 months. Boone Pickens says that oil will hit $150/barrel by year end.

How do you maintain profitability when faced with slowing top line growth and rising prices? Be more creative. Look for savings in the traditionally untouchable areas of indirect spend. Categories such as Advertising, Insurance, Benefits, Telecom, Software and Services often yield significant savings. More often than not, sourcing experts do not get the opportunity to look at these categories because the executives that own the spend do not want someone looking over their shoulders. "Our relationship with the supplier will be hurt" is often the excuse that is used to avoid an objective sourcing effort.

No matter who you believe, your bottom line does not have to suffer in this economy. Reducing spend is a legitimate way to profit. Objective, fact based negotiations will get you results without hurting your supplier relationship. Get started now just in case the government is wrong!
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Wireless Management: Own the Lines

on Monday, May 19, 2008

Sorry for the loose reference to the 1979 Toto hit "Hold The Line". I'm thoroughly embarrassed and need a cleansing shower (but Simon Phillips is a pretty damn good drummer, and Steve Lukathor aint no slouch on the guitar. Sorry, it's the musician in me coming out).

What I'm getting at is if you (the corporate entity) want to have a successful wireless savings implementation, assuming you have implemented the recommendations in the previous posts, you need to have some kind of a corporate wireless policy. So many companies have no policy whatsoever and it hampers any effort to reign in the costs.

A lot of companies have a mix of devices they pay for on a monthly basis and devices they expense. Doing the expense report thing is a waste of money. When you go that route, there is usually a cap on the amount of money allowed to cover the cell bill. Oftentimes, that amount is taken for granted. I've seen allowances as high as $175. I know that sounds absurd, which it is, but it's the truth. With an allowance like that or even remotely near it, the user probably has a family share plan where their spouse and kids are getting covered with the corporate dollar. Plus, when you go with an allowance limit, most people signing off on it won't dig in to the bill to see what they are paying for as long as it doesn't eclipse the cap.

The way around this is to have corporate ownership of all lines. Have a corporate wireless policy that clearly states that all reimbursed usage that is paid for by the company is owned by the company. That means whenever a new user is added to the company wireless profile, that line is owned by the company. If any user leaves the company, the device stays there as well as any contacts achieved under the payroll.

Implementing this is tricky. Various providers have different methods of legally transferring ownership of phones and it can get cumbersome. One thing that helps blunt this problem is many people, when faced with losing ownership of their own line, will opt to have the company buy them a phone that they use for business and can keep their personal phone so their friends and family won't have to learn a new number to reach you at. Be sure the wireless policy clearly states this option is available to them. This may lead to a large upfront cost when implementing the policy, but it will more than make up for itself in savings. Plus, if you have a large enough number of phones to buy and get a new contract signed, you may be able to get all the phones for free anyhow.

Once you have ownership of all lines, you have control over the plans and can dictate who gets what in terms of Blackberries, air cards, features, etc. There is a big savings potential with those costs. Also, you get consolidated billing. Rather than having to write 100 expense checks for wireless usage, you'll get one invoice per provider.
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Can I Say This Any More Clearly?

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If you’re someone who uses words (you know who you are!), you should read this post by Michael Lamoureux, our favorite in-the-supply-chain-network doctor.

Michael writes specifically about what may sound like old news but is a very current problem: the failure of the financial reporting supply chain, in too many companies, to produce financial reports that communicate effectively to their target user groups.

Rightly troubled by the frequent failure of the financial reporting process to produce clear and useful reports (particularly in the context of Sarbanes-Oxley), Michael offers a piece of advice that should interest anyone who has a role in any kind of reporting supply chain:

“Simplify. Use whatever leeway you have in report preparation to design reports that are as clear and easy to read as possible. Consider producing different summaries for different groups to simplify message communication.”

Doesn’t get more simple than that, does it? That second sentence is particularly good: one size does not fit all.

As business grows more complex and a company’s universe of stakeholders expands, smart and clear communication, not just in financial reporting but in all areas – corporate and social responsibility reporting, for example – becomes a strategic advantage any company should want to claim.

In fact, take it from someone who knows something about business strategy. Warren Buffet wrote a most elegant preface to the Security and Exchange Commissions “A Plain English Handbook”. I guess it should be no surprise that the man know for his plain talk knows a thing or two about simple communications!
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Wanted, Supply Chain Executives

on Friday, May 16, 2008

How to qualify to become a supply chain management executive? The Wall Street Journal’s CareerJournal gives some tips; Michael Higgs of purchasing.com offers some perspective; and researchers offer some data.

Mark Zafra, a Director of Supply Chain Management for Agilent Technologies profiled in CareerJournal’s “How I Got There” series, advices would-be supply chain professionals to prepare for success by picking up solid negotiation, logistics, financial analysis, and people skills; practical experience working with shipping and receiving employees and with all levels of an organization; and a BA in business or an MBA.

But Higgs, having been asked to define the skill set an employer might look for in a global sourcing specialist, offers a sensible approach that would work for pretty much any employer.

“You have to ask yourself what skill set(s) you value the most,” Higgs writes, “and then ask, are the rest of the skill sets trainable? There are only two skills that I see that are really hard to train, so the candidate should possess them upon hire: leadership…and tenacity…. People with these two skills and with the right mentorship have a really high probability to grow into a really valuable employee.”

So what does the research show? Last year, academics from City University and Cass Business School in London and the Anderson School of Management of the University of California, Los Angeles, published “What Employers Demand from Applicants for MBA-Level Supply-Chain Jobs.” The study analyzed 704 online advertisements for supply chain management jobs for MBA graduates. The analysis indicated that employers require these general skills (in decreasing order):

  • communication
  • leadership
  • project management
  • team
  • general analytical

and knowledge in these supply chain topics (also in decreasing order):

  • sourcing and supplier management
  • inventory and forecasting
  • information and electronic mediated environments
  • marketing and channel retructuring
  • transportation and logistics
  • metrics and performance
  • service and after sales support

And how are well are MBA programs succeeding in supplying the education that businesses are demanding? Check out the study.

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The Power of the British Purse

on Thursday, May 15, 2008

Can procurement move a nation?

The British government recently announced its intention to harness its spending power to stimulate its economy.


“We are taking the most ambitious approach yet to using public procurement as a key way to support and grow innovative businesses,” John Denham, the Secretary of State for Innovation, Universities and Skills, told the American Association for the Advancemnt of Science in an April 22 speech.

As the single biggest customer in the UK economy - to the tune of £150 billion annually - government can send important signals indicating future demand and boost nascent markets. As an early adopter, it can convince fledgling companies to forge ahead with new technologies.”

In a white paper, Denham’s department (DIUS) outlines its plans to build an “innovation nation” and the role that strategic purchasing will play in those plans. “The requirement for every government department to publish an innovation procurement plan will be instrumental here,” said Denham. “Developing targets and commissioning strategies that enable rather than stifle the purchase of innovative products or groundbreaking services, it will be DIUS's role to promote innovative procurement across government and facilitate the open exchange of good practice.”

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New Names, Same Slogans at ISM

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I recently attended (and worked multiple booths) at the ISM conference in St. Louis. My general impression is that the conference went over fairly well. Although far less attendees than last year, the individuals that were at the conference seemed to be more focused on learning the marketplace and what was out there that could help their businesses, as compared to Vegas last year, where it was obvious that a large percentage of the procurement professionals were there for free gift bags and a vacation. Of course we still had our fair share of people that came for our "giveaways" without any interest in the products or services, including a guy that attempted took a whole stack of Source One T-shirts, and the many many people that were taking visors or golf balls "for a friend".

Anyhow, the biggest surprise to me was the vast amount of new companies that were hosting booths at the show. In many cases, I am sure that it was just the first show that was attended by well established companies, but in many other cases it seems that many of the companies popped-up overnight in order to make a quick buck in a hot marketplace. It seemed that there were dozens of new software vendors (both hosted and behind-the-firewall solutions) that were all pitching the same basic esourcing tools and functionality. After speaking with a few, it also became obvious their lack of expertise in any given area, more the software developer types than actual strategic sourcing practitioners. I also noticed the lack of attendance of several major players in the market.

The one thing that was overwhelmingly consistent through most of the software vendors was their slogans. We saw about 25 variations of the same (not so great) message:

  • "Click to Save"
  • "Boost Profits With Just a Few Clicks"
  • "Why Hire Consultants?"
  • "Implement Strategic Sourcing With a Proven System"

I understand that most companies use a slogan as a simple hook to drive traffic to their booth, and then will explain their solutions in more in-depth, however it seemed that many of the software vendors there actually thought their software would do what their slogan said. I wonder if their are any procurement professionals that believe software solutions alone will boost their profits and allow them to click a few buttons to save money.

Really, can you just click a few buttons to boost your profits and save tons of money? Maybe if you have really poor or non-existent processes your organization will see some benefit, but mainly because you are standardizing on any process, not that the software itself will deliver you savings. And, "Why Hire Consultants", that one is outright laughable. To think that software alone can replace good resources (internally or outsourced) shows a complete lack of understanding of Strategic Sourcing. Strategic Sourcing is not the process of developing three RFXs or a Reverse Auctions and clicking a few buttons to solicit some responses. Sure, your organization might save a couple of bucks, but what is the overall impact to your supply chain, and how much did you really leave on the table? I challenge and esourcing application to answer those questions for you.

As I mentioned before, many of the slogans were simply to drive people to booths to have more in-depth conversations. But in a few of the solutions I went to investigate, the salespeople actually believed that their software alone (without supporting services) would implement a full strategic sourcing solution that runs itself. It definitely leads me to believe that market is becoming flooded with software developers looking to make a quick buck, that do not even have the basic understanding of true strategic sourcing.

I was also surprised this year about the amount of attendees that had already implemented esourcing tools compared to last year. However, we heard a lot of the same story, "Our company spent $xx,xxxx and the xxxxx solution still is not implemented properly." , or the more common "I don't know why we bought all of these modules, we are only using one piece of it". Hearing these comments reinforced our position with our free toolset www.WhyAbe.com, and now Puchasing Tools by ThomasNet (which we announced our partnership at ISM). Many companies do not require an expensive full suite of tools. Instead, they need pieces of the tools in a low-cost on-demand model that will help assist their internal processes, not replace them.

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Wireless Management: Contract Management

on Tuesday, May 13, 2008

We’ve reached the peak. The apex. The penultimate. The zenith (not your grandmother’s TV). If you have a significant number of wireless users that you are re-upping or moving to a new provider, you have a decent amount of leverage when it comes to adding your terms to a new contract. I hesitate to say how many lines qualify as having leverage, because it depends not only on the provider, but also the time of the year (end of quarter).

There are certain items you want to have in the contract that won’t take maverick skills to accomplish. Here’s a short list:

Activation Fees: Most wireless providers will charge an activation fee of about $30 for new users. That’s a b.s. charge. It’s another way for them to line their pockets and they know it. You shouldn’t get much resistance for having this charge waived.

Co-terminus Contract End Date: This benefits the provider so it should be easy to get this in the contract. It will definitely help to have all phone contracts end at the same date. This will save time keeping a spreadsheet of when phones are out of contract. It helps you by keeping things simple. It also helps the provider by locking in phones for a longer period of time. Assume a phone you are consolidating is six months in to a two-year contract. By having a co-terminus contract end date, that wireless provider now has that phone for 30 months, not 24. They shouldn’t say no to that.

Early Termination Fees (ETFs): There are two points to address here: get a percentage of your headcount of users waived and have a sliding scale of ETF fees. ETFs are expensive, but you don’t have to be nailed down to them. The first thing you want to add to any contract is to have ETFs assessed on a sliding scale. What I mean by this is to have the fee reduced by a certain amount for every month the phone is in service. A standard amount is $5 per month. So if a phone is under a two year contract but needs to be cancelled after 12 months, the ETF will be $60 rather than $200.

Percentage of headcount is another leverage point. What this means is you can eliminate a certain amount of lines without incurring any ETFs. Say you have 200 devices and negotiate you can cancel 10% (fairly standard) of your current headcount without incurring an ETF. That means you can get rid of 20 devices and not pay a cent. Ten percent is a standard number. Shoot high and you never know what you can get out of this. But never go for less than 10%.

Equipment Pricing: I hesitate to include this, but it’s worth mentioning. It helps to have a uniform fleet of phones and there are many quality phones you can get for free when you enlist with a provider. When it comes to higher-end devices, like Blackberries, you can demand a discount if you have the numbers to back it up. The discount will depend on how many units you need to buy and when you ask in regards to the wireless provider’s sales cycle. If you don’t have an immediate need, collect all the orders for new phones and place them at one time. The volume will drive a better price. Also, ask for phones at the end of the provider’s quarter. They are more amenable to discounted pricing at that point of the year to meet sales goals.

Accessories: Again, this depends on the number of lines you’ll be contracting. It’s not hard to get free accessories such as car chargers and belt clips. Blue Tooths can be discounted but probably not given for free.

Current Pricing: If your company is under an old contract or some amalgam, you may not be eligible for the most current pricing. This doesn’t require any kind of specific action, but it’s worth mentioning. If there is a new pricing program with the provider, if you’re under an old agreement, you may not be eligible for the new pricing until a new contract is in place. Be sure you are up to date with everything to get the best pricing.
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Wireless Management: Come Together

on Thursday, May 8, 2008

By now, you’ve heard me mention the word “consolidated” or “shared minutes” many times. This simply means all of your users (or a big chunk of your users) are all on one bill and one account and are able to share minutes with each other. I say “able to share”, not “are sharing”, because even though all users may be on one account, they may not all have shared plans.

Consolidating on to one provider, or as few providers as possible, presents a huge savings opportunity. It costs less to have peak minute coverage when shared as a group than on an individual basis. You end up purchasing less minutes because people who have high usage can use the minutes of people who have low usage. A person who uses 2,000 minutes a month can have a 450 minute plan and not go into overage because he’s taking minutes from others on 450 minutes plans who only use 100 minutes a month.

Let’s start with the basics of consolidation. You typically have to have at least five users to be eligible for business share plans. If you have less than five, an alternative would be to go on a family share plan. Just because you’re a business doesn’t mean you can’t take advantage of a family share plan; it’s all about the number of lines, not the nature of the entity.

Assuming everyone is on the same carrier but not on the same account, the next thing you need is to get the phone numbers and account numbers of all people you want to consolidate. Forward that list to your account rep for that provider and they should be able to help with the consolidation. Different carriers have different approaches to this. Some are easier than others.

What starts to get tricky is if you have individual liability phones (phones owned privately by the employee) that will be transferred to the corporate account and become corporate liability phones. Waivers have to be signed by the employee and submitted to the wireless provider, a bill may have to be given to the provider, the employee may have to call customer service and verbally authorize the corporation to take the line over. It can get obtrusive, believe me.

If you are migrating users from one provider to another, be wary of early termination fees, or ETFs. If your fleet of phones is scattered across the country and is a hodge-podge of users and carriers, it’s financially advisable to move people from small-time providers like Helio and US Cellular to larger providers like Sprint and Verizon. If you plan on doing this, make sure you know what the contract expiration date is of those users being migrated to another carrier. ETFs can range from $150 to $200, even if the user is just shy of fulfilling their term commitment. If there’s only a handful of months left on their contract, wait until it expires before moving. If a new contract was signed, it’s usually advisable to eat the ETF and move the user. If the user has 18 months left on a two-year contract and the ETF is $200, you’ll more than make up for the $11.11 per month the ETF breaks out to be.

When consolidating users, be ready with a new profile of plans. With some providers, you have to have new plans ready to go. With AT&T for example, if you consolidate individual users to a business enterprise plan, their individual plans don’t carry over. You have to know how many minutes you’ll need so you can buy that large chunk of minutes as soon as everything is consolidated. This isn’t as pressing an issue with Verizon or Sprint. Individual users will carry their plans with them and will start to share those minutes as soon as everything is consolidated and as soon as they have a share plan. With Verizon and Sprint, the difference between a share plan and an individual plan is $5. Verizon, as an example, has a 450 minute individual plan for $39.99; to be able to share those 450 minutes, it’s an extra $5 fee. You don’t have to change anything else but you have to specifically request this. Just because you’re asking to consolidate lines doesn’t mean your provider will automatically change the individual plans to share plans.

Consolidating multiple accounts to one may or may not require signing a new contract with that provider. That’s a perfect seg-way for my next post; what to include when entering into a new wireless contract.
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Wireless Management: Wireless Plan-tastic

on Tuesday, May 6, 2008

So here we are, the moment of truth. You know how many users you have and you know what their usage patterns are. Now it’s time to go out there and shop around for the best plan(s) to fit your wireless usage. The problem is each wireless provider has their own unique (or at least somewhat unique) plans to accommodate business usage. Which one is best? There really is no “best”. There are just better and smarter fits for your particular needs. Again, to keep things simple, I will assume you are already consolidated and sharing across users. I will address this specific point in a subsequent post.

There first thing to know is there are two different types of shared plan approaches. I will loosely call them pools and buckets. A pooled plan means every user must contribute some minutes for all to share. Think of it as a March Madness office pool where everyone who participates chips in $10 to wager. Then there are buckets, which is just one lump of minutes that people don’t contribute to, they just take away from. It’s like a bucket of crab legs at a seafood shack; the server brings them to you, you put them to good use.

Out of the major players (Verizon, Sprint, AT&T, T-Mobile, and Alltel), Verizon and Alltel use the pool method. Every user has to have some kind of a peak minute contribution, whether it be 450 minutes or 4,000 minutes.

AT&T and T-Mobile use the bucket approach. They have business enterprise plans where a large chunk of minutes is purchased for all to use. There may be a small line charge per phone using that pool. AT&T has a limit on the number of lines each bucket can have and charges a line fee for each line. T-Mobile has no line limit per bucket and each bucket comes with an included number of lines at no monthly fee. A line charge will be assessed after going over the set number of lines. In this approach, no one technically has allocated minutes the way Verizon or Alltel does.

Sprint has a hybrid of the two. A single user can purchase up to 4,000 minutes to add to a pool, much like Verizon or Alltel. But Sprint also has what’s called “Add-On” users. These users don’t contribute to the pool of minutes but they can take away from the minutes, much like AT&T and T-Mobile.

Those are the basics. In most instances, if you are reconfiguring plans, you will be sticking with the incumbent provider. That pretty much narrows down where to look. If you’re looking to migrate service to another provider, then there’s much more work to do. Either way, you have to do your homework.

Knowing the different plans can also steer what you look at in your analysis. Some plans may have unlimited within network calling but no free nights and weekend. You’ll want to look at those elements of usage along with peak usage to get the best plan. If you have a lot of weekend usage, you’ll have to figure that in to your minute needs.

Look for the details and special offers too. For a short period of time, Verizon offered what they called “Option 1” and “Option 2” plans. Option 1 plans had the standard number of minutes (450, 900, 1350, etc) and had unlimited nights and weekends. With Option 2, for the same price, you would get more minutes (550, 1100, 1650, etc) but no unlimited nights and weekends. If you have no or limited night and weekend usage, Option 2 would be more cost effective. This is a good example where due diligence can reap rewards.

The moral of the story is once you have a handle on your usage, and I mean really have a handle on your usage, start scouring the web and making phone calls to wireless reps and know their offerings inside out. Devise different scenarios to see which plan of attack provides adequate coverage at the best price. Sorry I couldn’t give a magic bullet, but I never said this would be easy.
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Global Sourcing Live Critique

on Friday, May 2, 2008

This past Tuesday, April 29, 2008, was the Global Sourcing Live virtual global sourcing conference. For more information, go to http://www.globalsourcinglive.net/. This is a very good idea and an ambitious undertaking. As with anything done on such a large scale, there are some kinks that could be ironed out for future conferences. Here’s my opinion of what could be improved upon based on my experience. I love being Devil’s Advocate.

Sound Quality: This is at the top of the list for a reason. If there was one thing that hamstrung this conference, it was the sound quality. It was difficult to hear and understand the presenters. I tried both the Windows Media and Real Player and so did a few coworkers of mine and the results were poor. If I really paid attention and cranked the volume, I could get it, but that would mean I couldn’t do anything else the whole time to distract me from honing in. Also, you could hear some background noise and mouse clicking which crowded out some of the speaking. I can’t imagine this being too hard to correct. I listen to NPR all day at work and that comes in fine as a live feed. Next time, try a better sound system or record it in advance and edit any background noise and enhance voice quality. I know that would take away from the interactivity, but I will address that next.

Time: Everything was GMT. Not to be your run-of-the-mill, egocentric American, but being on EDT, I missed the first two presentations, and if I recall correctly, part of the third. I like my job, but you won’t find me here at 6am; find me at the gym then. This goes back to recording the presentations in advance and lack of interactivity. If I was on Pacific Time, I would have missed the whole show, so it wouldn’t have mattered if it was interactive or not. So if everyone’s not on the same time and can’t listen live, why not spend the time to make quality audio? This ties to my next point, interactivity.

Interactivity: The lengths GSL went to to make this interactive are highly commendable. This isn’t a rag on their efforts in any way, just a few points to maybe make it a bit more user-friendly next time. If not everyone in every time zone will be in the midst of business hours while this conference is transpiring, why not broadcast pre-recorded presentations in a staggered fashion, the way TV shows are broadcasted across the U.S.? You might say, “The material is available to be viewed at anytime until the end of July, so if you miss it, big deal.” Reasonable point.

This is where sound quality, time, and interactivity come together. To give participants across the world interactivity with presenters, it may be a good idea to stagger the broadcast times based on time zones and then have a Q&A with the speaker after that block. Say you have an eastern and central time zone block starting at 10am EST. The presentation lasts 45 minutes and then is broadcast at 10am Mountain and 9am Pacific. While that second block is hearing the presentation, the first block is in a Q&A with the presenter. Have it revolve in such a fashion. This way you could record the presentation in advance for superior performance and sound quality, you can listen the day of at a reasonable time based on your time zone, AND you still have the opportunity to ask questions of the presenter. I don’t know how feasible this is, but it’s my thought.

Minor Point: The lounge, where you can interact with different participants and trade contact info is a great idea. In the future, it would be helpful to group participants by a category like job title, or company, or industry, or specialty, etc. Instead of browsing through every participant, with appropriate labeling, you could narrow in on who you want to engage with.

Overall: This is a great idea and I wish it success in the future. If I didn’t want things to improve I wouldn’t have put my two cents in cyberspace. I’m sure I will attend future conferences. GSL has a lot going for it. The ability to access the documents and download slide shows three months after the conference is a great idea. The web presentation was incredible. It made me feel like I was playing a corporate version of Grand Theft Auto. By making a few tweaks and having a bigger turnout with more sponsors, this could turn in to something.
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Wireless Management: Usage Sewage

on Thursday, May 1, 2008

In the wireless world, your usage drives the plans you buy, which in turn, drives your wireless spend. Squeezing every last drop of usage out of that spend takes some leg-work. Admittedly, it’s not easy, but it can add up to significant savings. If you’re starting from scratch, or just about scratch, it will take a large upfront time investment if you have a large number of users. The good thing is it will pay for itself. Once you have the right program in place, it just takes periodic maintenance after that.

There are two ways to go about getting your users’ usage: pour over the invoices or get a downloadable report from your wireless provider. Some providers are much better than others at making this information available. Intentional? Not only just providing it, but providing a respectable level of detail. Again, intentional? Did someone say conspiracy theory? Some times, you have no choice but to get your hands dirty and pull out the paper.

Until I say “stop”, everything I type from here will assume one wireless provider with all users consolidated and sharing minutes. I just want to keep things simple for now.

The main items you want are how many peak minutes have the users/company bought, and how many did they use. Most plans descriptions will have the number of minutes bought, and there’s also usually some table with minutes available and minutes used in a usage table per user. CD ROMs and online reporting should (emphasis on should) have these figures available. Once you’ve found this:

  • Spreadsheet the peak minutes bought and used for each user for the most recent three months at least
  • If the business is cyclical, try to capture the three or four peak months
  • Take a cigarette break
  • Take an average of the peak minutes used
  • Compare this to how many minutes are available
  • If average usage is less than 85% of available minutes, you’re over-subscribed
  • If average usage is more than 90% of available minutes, buy more
  • If average usage is more than 100% of available minutes, you’re in trouble. Remember that analogy to herpes I made in my last post?

If you’re over 100%, unless you have a roll-over plan, you hit the big-O; overage. Overage charges are usually easily seen on the individual user’s usage summary sheet. It may say something like “billable”, “voice charges”, “usage adjustment”. It can also be gleaned from the front page of the bill. If you see any exorbitant amount of charges for “Usage Charges; Voice” or “Cellular Services”, etc, unless everyone makes a ton of 411 calls, it can be safe to assume there is overage.

Stop. Ok, here’s an important caveat. Just because all users may be with one provider and they’re all under corporate liability, doesn’t mean they are all sharing minutes. It’s not uncommon for people to be added to a corporate profile of sharing users yet be subscribed to an individual plan. As you’re checking plans (for providers where it’s not just one big bucket) look for the word “share” in the plan name and look for that or some other indication in the usage box.

This will have two implications in your analysis. First, you have to take those non-sharing users’ minutes out of your calculation of total minutes available. Those minutes are only available to that person and that person only. If that individual user is in overage, stop the bleeding and get them minutes immediately. Don’t wait for that person to be absorbed into the pool.

Here I thought I would get into plans but I already wrote a book just on usage. Next time I promise to get to plans. Now that you know what the deal is with usage and you know your needs, you’ll have a better idea of what to look for when shopping for plans.

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