Roll Over Philly BigBelly, Atlanta Has You All Outta Sorts

on Tuesday, December 29, 2009

My holiday travels this season brought me through the Hartsfield-Jackson Atlanta International Airport (ATL) with about an hour and a half between flights. I grabbed some lunch at the food court area and headed toward my gate to relax and await my boarding time. That’s when the larger than usual trash cans caught my attention. At first I wondered if the Philly BigBelly’s had made it to Atlanta but then discovered the logo GreenSortATL.

It’s as simple as their slogan: “You Trash. We Sort. It’s Recycled.” According to the Hartsfield-Jackson News feature article, “Atlanta Airlines Terminal Corp. (AATC), the Airport’s facility management company, manages the recycling program. Solid-waste handling company Waste Pro USA transports waste via an alternative-fuel truck to a material recovery facility (MRF), where it is sorted. All recyclable materials are recycled, and the rest is sent to landfills.” All passenger, employee and business waste goes into these containers eliminating the need for separate recycling bins; can it get any easier?

ATL generates almost 70 tons of paper, plastic, food and other trash every day. The GreenSortATL program plans to reduce the amount of trash sent to the landfills by 50% within the first year, 70% by the end of the second year and become one of the largest programs of this type in the Southeast.

Kim Vagher, AATC executive director stated, “The solution, developed in partnership with Waste Pro USA, exceeded our expectations. The implementation of an MRF not only solved all of our operational and financial obstacles; it creates opportunities.” One of the opportunities the recycling program brings is the creation of 28 new jobs. I’m pleased to have learned about yet another green operation and now wish I had taken a picture to include in this blog! Check out the rest of the article to see the Airport’s other sustainability program initiatives.
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Use That Intel

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It doesn’t have much to do with sourcing or business practices, but the attempted terrorist attack on Christmas day did get me thinking about the use of intelligence, and how our government really does a poor job managing it.

There has been a lot of coverage in the media on this latest attempt, much of the discussion focusing on the government response and the new safety procedures that have been added to make sure an attack like this never happens again. The government acted quickly, and now we have more intense screening at the security line and more bomb sniffing dogs at the airports. The most interesting new rules involve what happens after you get on the plane. Here are a few I have read or heard about over the last few days.

Passengers are not allowed to get out of their seats for the last hour of the flight.

Passengers are not allowed to have anything on their laps for the last hour of the flight.

Airlines have been asked to turn off the screens that show passengers where they are on the flight route.

Passengers must be quick when using the bathroom.


I even heard about a case where a little girl was told she wasn’t allowed to read her book for the last hour of the flight.

The problem with the new precautions is that they are based on this single recent incident, with little or no attention paid to the fundamental underlying problem. Terrorists understand the rules, and then formulate plans to work around those rules. If they know you can’t get up in the last hour of a flight, they will make their attempts before that last hour. If you aren’t allowed in the bathroom for more than a few minutes (sorry Grandpa) then they will get faster, or go to a plan that doesn’t involve the bathroom.

Once a terrorist gets on a plane, the best protection we have is the other passengers. Americans have consistently shown after 9/11 that if someone tries something on a plane, we will take them down, and our success rate is very high. If the government really wants to protect us, the focus should be keeping the terrorists off the planes to begin with. In this case, the FBI was even alerted about the terrorist prior to his entry in the U.S., but the warning wasn’t acted on. The Fort Hood massacre was another example where information was available that could have been used to prevent the incident, but wasn’t. In fact, most of our recent attacks didn’t happen because of a lack of information, but rather a lack of response based on the information.

If you want to make sure I sit still for the last hour of my flight, that’s fine, but it does not make me feel any safer. I would feel safer if I though my government understood the information it collects, and acted on it.

Of course, the leap from government National Security Intelligence to corporate Strategic Market Intelligence is a big one, but the government might want to take notice of how best in class supply chain organizations use and respond to changes in market intel. Over the next few weeks I will be blogging about market intelligence in the supply chain world – what it is, how to get it, and how to use it effectively.

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Time to Shine for Finance and Procurement

on Monday, December 21, 2009

In a post last week I shared some information from the Aberdeen Group suggesting that the finance and procurement functions are becoming more closely related and more highly prioritized within organizations. Basware, a provider of purchase-to-pay solutions, has recently predicted a similar trend to occur over the course of the next decade. According to Steve Muddiman of Basware, “In stepping up to the challenges the new decade brings, these ‘buying and paying’ departments will find that they achieve a much more strategic role in the success of their organization, breaking away from their old perception of an internal service team.”

In a recent release to their site, Basware outlines some of the factors that they believe are driving this trend and are critical to business development in the near future. The major areas addressed in the post include process and department integration/fragmentation, buyer and supplier relationships, risk management, and sustainability. Recent economic conditions have caused companies to alter the way they run their businesses. While this sort of integration and reengineering is necessary to evolve and grow over the next decade, it has some potential side effects that create a lack of coordination and planning between “in-line” business functions and so called “service functions”. In the coming years it will be strategies, initiatives, and workflow designs related to the finance and procurement functions that allow companies to reconcile the “way we’ve always done it” with newer, more effective business models.

After reading a few different articles suggesting this sort of transition from fat and happy to lean and mean business processes, I was reminded of a seminar I attended in which the speakers detailed the advancements of “Web 2.0” and the potential applications of “Web 3.0” when it arrives. Once it was explained that Web 2.0 refers to the trends and advancements that have made the internet more interactive and user controlled, an audience member raised her hand and asked, “So what is the difference between Web 2.0 and Web 3.0”. The speaker smiled slightly and said, “Web 2.0 was the creation of all these wonderful advancements and applications. Web 3.0 will be when we clean up the mess and figure out what to do with it.”

Pardon the tangent, but the point I was making is that business process optimization is not a formula or linear plan that can be followed to a stagnate end. Many companies have started taking the steps to integrate departments cross-functionally and reengineer dysfunctional processes. Now, to get to the “Web 3.0” sort of state, they need to look at what they have done so far, evaluate their successes (and failures), and focus their strategies even tighter to hone early successes into sustainable competitive advantages.
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Man is Not an Island. Neither is China

on Friday, December 18, 2009

In three past posts, I referred to a semi-international spat that was transpiring over a US “Buy American” policy. Those posts can be viewed respectively here (1, 2, 3). Well, judging from a short article I read today on BusinessWeek.com. These isolationist-type strategies may be spreading. According to the article, China's Commerce Ministry has proposed legislation that will require any government purchases oh high-tech products to include innovation that is “indigenous” to China. In other words, the government is stipulating that Chinese tech companies get priority, by law, for all high-tech government contracts.

In the wake of such a monumental global meltdown, these sorts of policies seem to make sense. If there’s a storm outside, let’s board up the windows, hunker down, and protect what’s ours. Right? Wrong. Globalization has permeated most of the world’s developed countries’ domestic economies to such an extent that “boarding up the windows and doors” will most likely hurt, rather than help domestic recovery.

The Chinese have two good reasons for implementing these policies. For one, it will drive more government business to domestic firms. Secondly, any foreign companies who wish to compete for government contracts would have to transfer intellectual properties to China in order to do so. While these results will most likely help China in the short run, the farther reaching effects could be detrimental to China’s worldwide economic position. Particularly, any number of China’s strategic trading partners could take counter measures to “balance” these laws in other areas of trade. Also, as the global economy recovers it will be difficult for China to regain trade relationships that may be damaged from these measures.

As I said in previous posts about indigenization laws, no one wins in the event of a trade spat. Rather than working together to develop symbiotic trading relationships that make sense for companies from all countries involved, sanctions, tariffs, quotas, and a number of other forms of backlash can throw a wrench in the economic value of trade relationships.
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Rant: Pay for an RFP? No Thanks.

on Thursday, December 17, 2009

I am wondering what recent brilliant instructor/article/reporter/analyst gave purchasing managers this crazy idea that has been popping frequently...

In the last couple weeks, we have received multiple 'RFP Notifications' from unrelated companies that were looking to bid out their projects. The twist? They require the supplier (in this case, us) to pay for access to the RFP. This access has ranged from several hundred dollars to several thousand dollars, just for the right to view and respond to the RFP. And, we are not talking about government jobs, or projects that a third party or a subscription services gets a cut of (think mfg.com), we are talking plain old RFPs, direct with the buying group.

Scenario 1: We receive a 'RFP Notification' that only provides this bit of information: "XXXX company is accepting sealed bids/proposals from qualified firms to furnish the goods and/or services in the specification document. The Procurement Managed Services specifications documents can be downloaded electronically for a fee of $500. ALL PROSPECTIVE BIDDERS/RESPONDENTS ARE HEREBY CAUTIONED NOT TO CONTACT ANY MEMBER OF THE xxxx COMPANY OTHER THAN THE SPECIFIED CONTACT PERSON" (who can be only identified after purchasing the document). Now, as tempting as this is, no serious consulting firm or supplier would ever even remotely entertain the idea of throwing away hundreds of dollars to gain access to an RFP that may not even be related to their business, when they cannot even speak with or email a contact person to learn summary information of the RFP.

Scenario 2: A company that has been a prospect for a long while reaches out to us out of the blue. They are seriously considering engaging with us, but they developed what they think is a good method on how they will rank us with other providers in our industry.... They identified a specific product that they are looking to make a one time purchase of, in this case the product already has a pretty narrow list of recognized qualified suppliers (less than 5). They are going to go out to bid to the suppliers on their own and will negotiate with them in order to get the best final offers. After this is complete, they will send us the specifications (along with several other consulting firms) and want us to go back (along with everyone else) to the same suppliers and try to negotiate a better deal. They will not provide us with their pricing/efforts/information until after we submit our bids/results to them. If we come back with the best bid, compared to other consulting firms and their own efforts, then they have the option of hiring us based on their own internal qualifications, and there is no guarantee that we will be paid at all, if they feel our commission structure brings the price too close to the price they negotiated. Oh, and one more thing, they require us to pay $2,000 to make sure we have "skin in the game". So, first off, when any company assigns resource to work on an RFP, be it a consulting firm like ours that is going to assign human and electronic resources to a sourcing event, or a supplier that needs to fill out a multi-page RFP document to win business, they already HAVE "skin in the game". Secondly, the idea of sending multiple organizations out to beat up the same supplier list on the same exact items is going to produce ZERO results. In fact, it will do nothing but damage any relationship that organization has with those suppliers.

Collaboration is an extremely important component of Strategic Sourcing and your Supply Chain. This tactic of making suppliers pay for an opportunity to look at your business does nothing to help your position to develop good relationships that go beyond unit cost with your suppliers. You can have the best of both worlds, unit price reduction and improved service levels, but it will not happen by opening up communications with your supply chain with "give me money".

If you are in procurement or sourcing for your organization, please think twice before deploying these "Pay for an RFP" tactics within your organization, because they best organizations are going to respond like we did, "No Thanks". Also, if you missed it before, take a moment to read this previous post "Stop RFP Spamming!!!" I can guarantee you will not achieve the results you are looking for with either strategy.
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When the Economy Gets Tough, CPO’s and CFO’s see Eye to Eye

on Wednesday, December 16, 2009

According to a recent article on CNNmoney.com, the Aberdeen Group has released a new study titled "The CFO's View of Procurement: Work in Progress," which demonstrates how economic turmoil has brought strategic sourcing to the attention of many C-level executives who may have previously considered purchasing a tactical function during easier times. Included in this group is the CFO, who can be a very powerful sponsor for any sourcing initiative.

In most organizations, the CFO’s primary function is to develop financing strategies, and oversea/track the inflow and outflow of cash. While intuition would suggest that the individual responsible for tracking cash flows would have their goals aligned with the CPO, this has rarely been the case over the past decade. While this lack of integration could be attributed to a number of reasons from sloth, indifference, a lack of understanding, or the curse of the “status quo”, one thing is for certain. The worldwide economic downturn, and the shockwaves it has sent through nearly every industry, have caused CFO’s cast a focused eye on the development of strategic procurement initiatives. According to the report, the majority of these CFO’s are beginning to realize that they are only scratching the surface of potential savings that can be realized by optimizing the procurement function.

So what does this mean to the average procurement professional? This white paper is the perfect “light reading” suggestion for C-level executives within your organization to obtain some of the political pull and top-level sponsorship you will need to develop and effectively integrate strategic sourcing programs. In the past CFO’s would rally behind their beliefs about the financial pros or cons of making a capital purchase or plant acquisition, however day-to-day purchasing seems to have slipped off many CFO’s radar. You can use the information in this paper to educate and motivate managers throughout the organization to align their goals cross-functionally with procurement processes.
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A Plea for Regulation

on Tuesday, December 15, 2009

Plenty of others have used the Tiger Woods’ scandal as an excuse to discuss another topic, and I’d like jump on that bandwagon. In particular, I’d like to connect the dots between Woods’ mistakes and the need for a tightly regulated banking industry.

Remember the bailout? Supposedly, most of the money we gave to the banks is getting paid back in an effort to prevent government intervention in the day to day activities of banks. The markets have stabilized; we don’t need your money anymore, now lets forget this ever happened. One thing we expected after the bailouts was for the federal government to re-regulate banks to prevent future meltdowns. Most of the regulation is still in committee, but it sounds like what will get passed could give banks even bigger loopholes than the existing laws, and certainly won’t help prevent future meltdowns from occurring. But more on that later.

What if, before he started his crusade of serial infidelity, Tiger was told that his actions would result in a loss of friends, family, colleagues, and reputation? They would also cost him half of his existing fortune, and reduce his future earnings by 80% or more. Do you think he would have even started to engage in this behavior? If so, do you think he would have started thinking twice after 5 affairs? 10? 15?

The human default setting is to take absolutely everything you can get. The consequences of our actions may be evident ahead of time, but unless those actions are well defined, short term gains will always win out to possible long terms consequences.

This is true of Tiger Woods, and it’s just as true as the credit default swappers – banks, traders, and insurance companies. All of them knew what they were doing was wrong. None of them cared, because specific consequences weren’t spelled out ahead of time.

Looking back, you might think what the banks did was criminal, and it probably should have been. Fortunately for them, the Clinton administration, steered by the recommendations of then Treasury Secretary Robert Rubin, took away the consequences and said let the markets bare what they may. But just like Tiger, take away the specific penalties, and the markets will take until there is nothing left.

It only seems natural then, that we put restrictions back on financial institutions in an effort to prevent another meltdown. After all, the original Glass-Steagall Act kept markets relatively stable for 65 years. It only took the banks another 7 years to completely wipe out again after its repeal. It’s been about a year since the bailouts started, where is that regulation?

The problem is, the same folks that helped get the Glass Steagall Act repealed are advising the President now, and they all personally benefited from the repeal of that Act. There is a great article by Matt Taibbi in the December 10th issue of Rolling Stone that discusses the connection in greater detail.

I for one am more hopeful than Mr. Taibbi that we will see meaningful reform out of the Obama administration. The article admittedly can’t make the connection of why Obama would choose to fill his advisory roles with these sell-outs and jokers, and I think the President has plans that we haven’t seen yet. As a country, we just need to make sure it becomes his priority.

Speaking of which, this morning every major news outlet in the country has joined together to make sure I understand that Tiger Woods’ wife is no longer wearing a wedding ring. No mention of a financial regulation bill though.
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NC State’s Supply Chain Resource Cooperative

on Monday, December 14, 2009

A few weeks ago I had the opportunity to attend the bi-annual meeting of the Supply Chain Resource Cooperative. You can learn more about the cooperative here, but in a nutshell the program, which is run by North Carolina State University, pairs up students in the supply chain studies undergraduate and graduate programs with businesses that need research help on specific supply chain related projects. The students are assigned to an actual company, given a problem, and then asked to analyze the program and provide recommendations.

The meeting attendees were primarily faculty and staff on the Supply Chain Resource Cooperative, representatives from businesses that are members of the cooperative, and others with an interest in the program. Over the course of two days, students presented the results of their work for that semester. The theme of the meeting was the use of market intelligence in the supply chain, and several speakers gave their take on that topic.

Overall, I was very impressed with the presentations, which drilled into more detail then I have come to expect based on other supply chain related seminars I have attended. The students knew the industry well and the co-op provides them with the real world experience needed to hit the ground running after graduation. We were there looking for talent to recruit, and what we found was a motivated, knowledgeable, and experienced group of potential new hires. If you are lucky enough to be hiring during this recession, I strongly recommend reaching out to the co-op to learn more.
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It Takes One to Know One

on Friday, December 11, 2009

In order to make wise business decisions you need to understand human behavior, in other words it takes one to know one. People tend to act in their own self-interest when making financial or other life decisions. Just as this applies to our personal lives, it also occurs the same in business settings. Companies are always looking for ways to better themselves financially, as well as maintain a good public standing. At least in the cases where public standing is important to the success of the company, then again when it is not a good thing! Businesses want to make the most of any transactions they are involved in, financial or otherwise.

Keeping this self-interest concept in mind, companies looking to service other companies need to also consider how this business frame of mind affects them. When developing a customer support system companies offering both goods and services need to consider what the customers and clients want and need from their business. These needs can vary from the level and type of support provided to the quality and availability of their products and services. Additionally the opportunity cost of providing high quality goods and services has to be considered. In other words, will you see a big enough payoff from the costs that your business expels in order to best serve your customers. Weighing the benefits and the risks involved in cost savings and process improvements is an important step in deciding what areas to focus on. All in all knowing what you and your business are dealing with when encountering other companies and the people in them is essential when making critical decisions for the future of the business relationship.
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The Cheap Geek: Black Friday – A deal or BUST?

on Wednesday, December 9, 2009

Shopping, Shopping, Shopping!!! Thought it would be appropriate for the holidays to give a little insight on sale shopping.

So, on Black Friday, I saw a Free People dress at Bloomingdales on sale for $71.68 (originally $128). Not bad, but I am anti-retail and had a gut feeling that if I waited a little longer I might could get the dress for a little cheaper. The next Thursday, they were having another sale and I got the dress for $46.44. Retailers are so sneaky, leading the average consumer to believe that Black Friday is when you will find the lowest price of the season. I know most retailers have a 100% or more mark-up (i.e. buy it for $50 and sell to consumer for $100), so that's why I try to only pay half the retail price on anything I purchase.

So how can I apply this mechanism to my telecom negotiations? When is it better to “shop” for telecom services, wireless services, PBX maintenance, etc. Or does it matter? I am going to tickle my brain and hope to have a response to these questions in my next post.
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Green Procurement: What does it really mean?

on Thursday, December 3, 2009

I read a great article earlier this morning by John Davies of Greener World Media. The article details the results of a survey of 450 companies conducted this October and makes some interesting points about green procurement trends. I’ll reflect on some of the highlights, but you can check out the full article here.

According to the survey, over the last year, companies have increased sustainable procurement practices by 63%. These purchases spanned all sorts of categories from office supplies, to cleaning chemicals, to computers. Believe it or not, office supplies led the way, with 78% of respondents claiming to have implemented procurement policies to go green. This figure must be taken with a grain of salt, though. Out of all large companies surveyed ($1 billion plus in revenue) only 53% have claimed to have included office supplies in their sustainability policies. A race for green computer production has also fostered great amounts of competition and cooperation in the computer manufacturing industry that has caused dramatic improvements in producing greener technology.

Another encouraging finding is that 73% of manufacturing firms claim that they have started to screen their direct materials for “green attributes” While 75% of all companies surveyed say they have informed suppliers that these green attributes are important and 59% even include sustainability requirements in RFP’s, it seems that some companies are still unsure how to measure just how green they are purchasing.

The GreenBiz Intelligence panel, which also conducted the survey, aims to highlight and correct this dilemma. In the article Davies cites a great example that demonstrates’ the lack of information and decision support tools that exist for companies to make truly green decisions. A panel member asked, "Is it better to buy a 'compostable' product shipped all the way from China or a recycled Styrofoam product produced in the USA (that will be recycled after use)? Always buying a 'green' product may not necessarily be a 'green' practice."

Panel members and survey respondents have noted that internal measurements such as supplier scorecards and codes of conduct as well as external measures like ISO 14001 certification and certifications from Green Seal, Forest Stewardship Council, and EPEAT have, and will continue to add to the pool of resources executives will need to guide their purchasing decisions.
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Developing Teams to Facilitate Change

on Tuesday, December 1, 2009

In the realm of procurement, most improvements require some sort of change from members at various levels of the organization. From upper management all the way down to line workers, any number of stakeholders will have difficulty accepting and adjusting to these changes. If any procurement initiative is going to be implemented successfully the problems that result from change must be identified and effectively managed. Below is a framework for developing teams and task forces that will be able to work together to successfully identify and overcome obstacles that result from change-related decisions.

The first step in developing a change-management team is referred to as Forming. During the forming phase the proper personnel and resource requirements must first be identified. If the initiative is going to have cross-functional ramifications, it is important that the proper stakeholders from across the organization are included in this team. During this phase it is also important to recruit executive commitment and clearly define key goals the initiative will accomplish and create motivation/rewards systems that will encourage team members to work toward developing integrated solutions.

Once the “who we are and why we’re here” is determined a team must enter the Storming phase. This is a phase that, if neglected up front, could have very detrimental effects on the team later down the road. During the storming phase, before any strategies or plans are discussed, each team member gets to voice their concerns, doubts, fears, or potential reasons for resistance. This phase can be difficult, but it is necessary in order for the team to clear the air, allow for healthy debate, and be ready to work as a together (with each others’ concerns in mind) on the same side of an issue.

After the initial Storming phase, it is important that a set of rules and norms are created for team discussions. This phase is referred to as the Norming phase. During this step agendas are set, rules for negotiation are developed, and each group member is made aware of what will be accepted as legitimate forms of disagreement. This seemingly perfunctory step is valuable because it allows group leaders to curb any dysfunctional conflict and keep discussions heading in a positive direction.

Now that the proper mix of personnel is on board, all initial conflicts have been addressed, and the guidelines for discussion have been set, the group is ready to start Performing. This phase represents the “getting down to brass tacks” for which the group was originally assembled. Many teams, particularly ones under the pressure of a deadline, rush into the performing phase without effectively forming, storming, and norming. When this happens, hidden agendas, a lack of resources, and personal conflict can negatively affect the cohesiveness of the team and their ability to manage change.

Although these four steps may seem like common, sense they can act as a checklist to ensure that a team consists of the right people, with the right goals, having the right conversations that will guarantee a change initiative’s success.
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