I’ll re-commence when I again have something to say.

Thanks for your time over the past three years. I’ve greatly enjoyed the ongoing dialogue I’ve had with you and I feel honoured that my missives, coherent or otherwise, have informed and entertained.

All the best,

Doug

Tim’s objection is that buyers use auctions to impose terms on suppliers rather than engage in dialogue.

As a data guy, I’m a big fan of auctions because they provide a controlled environment to collect and disseminate information – sellers see what their competition is willing to do and buyers get an overview of the market.

Nevertheless, I agree with a lot of what Tim says because auctions create information flow in only 2 of the 3 possible directions. Data flows from supplier to supplier and from supplier to buyer but it does not flow from buyer to supplier.

This can create a situation that I will call the Incumbent’s Curse. It’s the other side of the coin from the Winner’s Curse. In the winner’s curse, the winning respondent in a tender finds that, in the heat of the auction, they have paid way too much. In the Incumbent’s Curse, the incumbent supplier cannot win the tender because they know how damn expensive this buyer is to service.

Imagine a supplier who delivers products to offices. In the spec in the tender, the buyer has not mentioned that it takes 30 minutes to get through security and that deliveries can only take place between 7:30am and 8:00am. The incumbent knows this and knows that this adds 1.5% to the cost of servicing the contract. The other respondents do not know this and have a 1.5% “advantage” in the auction. The incumbent loses the contract. The winner unwittingly shaves 1.5% from their margin.

Perhaps we need an auction facility that encourages a three-way dialogue.

• 13:12:30: Secret weapon of the Chinese BPO industry “Because their customers are Chinese they [have no] labor cost differential.” http://bit.ly/TIHuP
• 13:17:26: reportonbusiness.com: Reviving the shadow banking system “I highly recommend we put brakes on it” http://bit.ly/r4n06 Yep.
• 23:01:18: Dyson on climate change: “inductive science is of limited utility when the object of study is an extremely rare event” http://bit.ly/oYGlD

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• 20:15:27: The Pros of Planting Startups in Smaller Cities – BusinessWeek This will be a long term trend, I bet. http://bit.ly/yX5K

The important factors in supplier selection

• 20:27:54: The…fall of global sourcing “market prices, expected quality and supply chain flexibility [matter]“. Location does not http://bit.ly/un7H

Supply chain ownership

• 21:12:04: Fabindia Weaves in Artisan Shareholders – BusinessWeek http://bit.ly/DAl7T Joint supply chain ownership – great to see this implemented!

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• 21:36:06: “The Strategic Sourceror: Government Goes Open Source – the Wrong Way.” http://bit.ly/3IbTn
  I disagree with this article.
• 21:37:57: SS says “US Government could [not] be … the poster child for best practices … so I am not very excited about seeing the final products.”
• 21:39:56: But why couldn’t they be? There’s a lot of people in the US govt. Surely some must be doing something right! Why write them off so glibly?
• 21:45:12: SS contrite comment: “Perhaps I was being a bit rough … a step in the right direction is better than nothing at all.” http://bit.ly/7vUI6

US Housing Crisis

• 22:04:19: Solving the US Housing Crisis “give foreigners who…come to the US and buy a home … a [green card]” http://bit.ly/14cRew Why not?

Risk v. Stability

• 22:08:59: Taking Risks Is More Important than Stability Right Now – BusinessWeek http://bit.ly/GoSdE Are these opposite business states? I think not.

Divvying up Equity in startups

• 22:13:18: Seth’s Blog: Advice on equity “A friend asked me to help him … split the equity in a [startup] company.” http://bit.ly/ubiIj Great advice

Cloud computing: Making technology available to the masses

• 22:29:54: HowTo: EC2 for Poets “The easier it gets, for more people, the more interesting things we’ll be able to do, together.” http://bit.ly/r7S0e

Importance of incentives

• 22:36:08: Thank you netbooks! Microsoft placed in an environment where they are motivated to deliver what we need. http://bit.ly/6EUoL

Spend optimisation bake-off

• 22:51:37: SpendMatters: Let the Optimization Bake-Off Begin! http://bit.ly/Fofta This is the best use of the new media I’ve seen in Procurement!

AMEX and Harbour Payments

• 22:57:43: SpendMatters: Amex: No Safe Harbor http://bit.ly/cKVk This seemed like such a good idea two years ago. Why can’t AMEX make this work?

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• 21:28:49: Finextra: ING launches pension peer comparison Web tool: http://bit.ly/lKc7w
• 21:26:00: There’s unacknowledged cross-over between marketing and procurement. INGs app shares common features with supplier comparison apps.

Corporate sustainability reporting

• 22:01:14: Corporate Sustainability Reporting: The Executive Disconnect But there’s a major gap between understanding and action, according to a survey released this week. http://bit.ly/3Y55HP
• 22:03:28: Survey says 90% executives say sustainability reporting is important. 50% say they do it. My bet: 10% actually do it. http://bit.ly/3Y55HP

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…For all the recent grim news and economic forecasts, 2009 is shaping up to be one of those years where anything could happen. The current set of economic conditions provides a huge opportunity for procurement to demonstrate how the function can deliver value.

Why do we use such navel-gazing, foot-shuffling, back-of-neck-rubbing language when we talk about the role we play in business? Why not just say “There’s some cracking opportunities to lower your company’s operating costs and ensure continuity of service!”

When we talk to suppliers, we talk straight. Why not elsewhere?

This type of graphic falls into the category of tree maps which, along with the bubble chart, are my favourite tools in my data analysts toolkit. The tree map and the bubble chart allow the relationships between multi-dimensional data sets to be grasped at a glance. If a picture is worth a thousand words, a good tree map is a thesis and comic strip rolled into one.

The tree map to the right is of particular interest to procurement professionals because it breaks down consumer spending into categories and sub-categories. If you showed your spend data in this format, your boss would either think you’re a star, or that you have way too much time on your hands!

Apple asked how few controls do we really need to operate an mp3 player and the iPod was born. Asus asked what does a user really need to surf the net and the eee pc burst onto the market. Oztent asked does a car camper really need their tent to fit into a tiny bag and the RV tent is the result.

When you are designing your processes and systems, ask yourself what you are trying to accomplish and what is the least functionality required to accomplish that objective. Back to the iPod example, an mp3 player needs to play mp3s so it needs a play button. You may also need to pause your mp3 player and scroll through your music collection. Apple asked “Why does that require more than one button?”

Likewise, with procurement systems, if you’re designing a procurement system, does it need anything more than a way of delivering approved requisitions to a supplier? Probably. But how little more can you get away with?

Each year infographic tools get better and publishing gets easier. We use Tableau extensively but a large number of tools exist (A couple of years ago, I predicted MS would have bought Tableau by now, but they haven’t yet – don’t know why not).

A good infographic can convey an incredible amount of information in an unbelievably short amount of space and time. As an example, take a look at this incredible visualisation from the New York Times showing box office receipts over the past 22 years. It’s a great visualisation because every dimension communicates an additional piece of information.

Colour shows total box office receipts, height of each movie indicates receipts at any point in time, height of the entire stream shows receipts from all movies at that point in time. Brilliantly conceived.

Let’s look at a counter-example. Consider this effort from the Financial Times to emulate the brilliance of the New York Times infographic team. The infographic below has only a single dimension – size of loss – yet displays this across four dimensions of bubble size, x-axis, y-axis and colour. Why they didn’t use a bar chart is beyond me.

FT Infographic

Now that tools are available to bring infographic creation to the masses, we’ll be seeing the full spectrum of visual display from the brilliant to the ridiculous.