Archive for September, 2009

Cloud computing sourcing

September 30, 2009

One topic that kept popping up at the recent IBX Purchasing Executive Summit was the transition of goods to services and the implications this has on purchasing. Take cloud computing for instance; it’s the IT hype bar none of 2009, yet few purchasing functions have experience in sourcing the service let alone managing contracts.

Given the circumstances, the benefits of cloud computing are quite obvious:

  • Financial savings – CAPEX is reduced to a minimum
  • Pay for actual usage – no need to own excess capacity to deal with peaks
  • Shared cost – overhead is shared among all cloud customers

If the evangelists have their way, it’s a no brainer.  A recent Gartner report stated that in 2011 early technology adopters will forgo capital expenditures and instead purchase 40 percent of their IT infrastructure as a service. Other industry analysts have compared the advent of cloud computing to the establishment of utility providers.
In the early stages of industrialism, any one investing in a factory by default had to invest in their own power plants. A few years later a utility sales man – figuratively speaking – showed up with a power cord and rendered the factory owned power plant useless.

So what is cloud computing: frankly put, it’s outsourcing with a twist: not only has your staff (and their computers) left the building, so has your data.

This of course has severe legal implications, the roots of which need to be understood and scrutinized during the sourcing process. In particular sourcing professionals need to ensure that contracts cover the following key issues:

  • Data security and data regulation – not only need cloud computing supplier adhere to customer policies but they also need to be able to uphold legal obligations relating to where the customer is based.
  • Performance issues – SLA:s are essential and these need to include all aspects of business continuity.
  • Contract closure and exit – what happens to your data once the contract is annulled and how will the cloud computing supplier deliver the data?
  • Supplier risk – supplier stability is essential; if possible perform a due diligence before entering into the contract to uncover unwanted scenarios.

Posted in Cloud computing, Software as a Service, Sourcing, Supply Chain Management, Web 2.0 | Leave a Comment »

IKEA Billy turns 30

September 29, 2009

In a couple of days, IKEA will celebrate the 30th anniversary of their classic bookshelf Billy and to this date IKEA has sold more than 41 million Billy:s and whilst doing so continuously improved their supply chain performance in such a manner that they’ve been able to lower the price to consumer by 30 percent.

One of the lesser known reasons for this superb performance is the constant interaction between IKEA designers, purchasers and the actual end-user goods. Many IKEA purchasing staffers eat their lunch in the IKEA store food court – right there alongside consumers – and on their way to lunch they pass through the store seeing their products “in action”.

So not only do the purchasers and designers have the possibility to constantly monitor how consumers judge their products, they’re also provided ample non-formal opportunities to engage in development. And as anyone familiar with creative (and yes, I do count purchasers as creatives) work will acknowledge – the best ideas are often hatched outside of the confinement of the office.

Posted in Organization, Supply Chain | Leave a Comment »

Where lies the responsibility of green purchasing

September 22, 2009

At the IBX Purchasing Executive Summit a few weeks ago the most exciting moments – from my perspective – was an Oxford Debate format where focal purchasing issues was debated in a formalized yet open spirited manner. One of the topics of the debates was green purchasing and where the responsibilities lie; at the purchasing department (or the company) or at government level (meaning that purchasing functions should follow rules and regulations and not go out on a limb on their own).

Now this debate is not new, yet it still significantly relevant, something which was evident by the amount of energy the participants put into their performances.

Without revealing too much of what was said and without placing my views as some sort of consensus on the issue, I’d still like to add a few pointers from the world of practical philosophy to further expand on the issue.

In a recent article in the Swedish sustainability magazine Camino a number of scholars reflected on the role of the individual in association to sustainability in general. Folke Tersman, professor of philosophy at Uppsala University; who recently published a book called “Tillsammans” called for a more collaborative approach due to the fact that broader political standpoints are necessary due to the fact that they are viewed as more solid than actions of the individual; still this does not leave room for irresponsible actions from the public. “Only if the majority of the public votes for dedicated and brave politicians are the right decisions possible” he concludes.

Michele Micheletti, professor in Political Science at Stockholm University provided similar thoughts in a Dagens Nyheter article; the responsibility lies on the individual, “the alternative is that everything is regulated on an international level, something which is highly unlikely”.

The two polarities; the government vs. the individual; have spawned a number of reactions, the most powerful being a middle route of lower level commitment – smaller collectives that work on local level that empower the individuals without waiting for the full international or governmental involvement. I believe this is a valid way forward for purchasing functions struggling with these issues – regional or industry focused coalitions that set and uphold standards; this leaves room for powerful initiatives yet retains a form of sensibility providing a fundamental market balance.

Posted in green procurement | 1 Comment »

Going one better on green cell phone services – Orange launch second hand plans

September 14, 2009

I know this isn’t exactly news but the fact that Orange is expanding it’s green/csr initiatives to include pre-owned and “second life” (a buy-back plan) telephones is one better than the Sony Ericsson/Samsung green cell phone plans.

Because as we all know, the best way to save money is to not spend money – and given that, as an example, adult swedes have on average 2,4 cell phones (according to el-kretsen) there is quite a lot of money to be saved using the equipment that is already on the market.

And the savings in this case is even more obvious when recycling costs are taken into account. The recycling of consumer electronics is a shady business and as supply chain management enters the era of life cycle planning, this might be one route to take to ensure that csr-initiatives are not tainted at the end of a product life cycle.

Posted in green procurement | Leave a Comment »

The importance of managing end-user expectations

September 11, 2009

At the IBX Purchasing Executive Summit earlier this week many wise words were spoken, but in retrospect the words that linger I my mind and won’t go away came from Gerold Carl, the Director Strategic ePurchasing at Lufthansa.

When describing the lessons learned from the very impressive Lufthansa e-procurement initiative (more on which can be learned in this Efficient Purchasing interview) he noted that end-users were reluctant to go for e-learning often pushing for the more costly in-person training approach. When asked why he thought this might be he matter-of-factly nailed answer:

“…our end-users were expecting somthing like Amazon.com, we gave them SAP…”

It just goes to show how important user-friendliness is, and how rapid e-procurement providers need to be in adapting B2C-like user experiences. If e-procurement providers can’t deliver up to those expectations, customers are no doubt heading down a path of costly training, change managment, information and expectation management.

Posted in Change Management, Procurement, Technology | Leave a Comment »

Risk management vs. Risk avoidance

September 8, 2009

As I rode my bike to the Stockholm central station this morning it struck me that the more protected you are the faster you go, and the more risks you take. Since I was travelling to the UK I had left my helmet at home (cost carriers are low cost for a reason, and extra luggage is not one of them) which is rare, so as a consequence I was taking it a quite bit easier than I normally would have. And since I was riding fixed gear, I also kept my attention as far upfront as possible, since there are no mechanical brakes on the bike to assist with the process of slowing you down.

Since I was lacking in both protective (no helmet) and divertive (less breaking power) aspects I was very aware of the risks I was taking and thus I was doing my utmost to avoid any. This of course got me thinking.

Are we less willing to accept even the notion of risk if we lack any risk management solution at all?

I’m quite sure that this is true for us as human beings. But does this mean that sourcing professionals who know that they lack the processes and tools to manage risk source more carefully than those who are secure that they can handle any problem should they arise?.

A lot of risk management vendors push strongly for the need of supplier information – preferably in real time to avoid outdated information – but I’m quite convinced that the best risk management solution starts at home with large dose of risk awareness. Carefulness might not be one of the top credentials when scouting for purchasing talent but the ability to avoid risk altogether should definitely be rewarded in one way or another.

Posted in Change Management, Organization, Risk Management | 2 Comments »

Procurement and web 2.0

September 7, 2009

There’s been a lot of chatter regarding the pros and cons of Web 2.0 technologies and their place in business in general and supply chain management in particular. And this has been particularly evident when it comes to developing end-user interfaces for IM&S procurement.

Coupa does a great job of describing some of the communication clutter that abounds in many procurement functions in their wickedly funny Coupa Sam Procurement Hero marketing ploy. But for some more hard on facts of the rise new technologies and their place in business McKinsey Quarterly might be a more secure source of information.

They recently published the results of a global survey targeting “How companies are benefiting from Web 2.0” and there are some interesting bits of information in there. The adoption rates and growth of Web 2.0 technologies is growing and though it is most evident on competence aspects, there are signs of adoption in supply chain matters as well.

  • 51 % of respondents report measurable gains in access to external knowledge (+25)
  • 49 % of respondents report measurable gains in lowered communication costs (+20)
  • 37 % of respondents report measurable gains in supplier satisfaction (+20)
  • 23 % of respondents report measurable gains in reducing supply chain costs (+12)

In times of turbulence and increased risk all of these aspects point to an increased usage of Web 2.0 technologies as communication and transparency are crucial to efficient supply chain management.

Posted in Change Management, Technology, Web 2.0 | Leave a Comment »