The Number 1 Question . . . How Can You Help Us?

Posted on April 21, 2008

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Over the past few weeks I have received a spate of questions regarding Procurement Insights, and in particular the services offered through Hansen Consulting and Seminars.  In short what do I do, and how can I help an organization.

 

To begin, one does not have to be in the throes of a disaster to benefit from my area of practice.  While demanding situations in which bridging the chasm between an expected outcome and the reality of unrealized results is certainly something for which I am known, it is often my ability to see a problem on the distant horizon and structure the appropriate response that has generated the greatest level of client satisfaction.

 

What makes what I do unique is that I am unencumbered by a commitment to promote a particular methodology such as SCOR or Six Sigma because it is either trendy or has been recommended by the latest expert.

 

While I have a great deal of respect for both the insight and determination it takes to develop a “standard,” I realized a long time ago that true expertise is directly related to an ability to recognize, understand and successfully adapt to the changing variables of a dynamic world.  In short, what is popular is not always right, and what is right is not always popular.  And I firmly believe that an attempt to consign and confine a real-world practice to a set of “universal” standards that fail to recognize the disparate requirements of diverse stakeholders has proven to be folly.  An 85% rate of ERP/e-Procurement initiative failure gives testimony to this fact.

 

It is through this lens of objective assessment in which a pre-ordained outcome has not already been determined that my clients have realized the most significant gains.  (Note: In providing me with a reference, a senior industry executive demonstrated my willingness to challenge the veracity of mainstream thinking when he said, “Jon is one of the few professionals who understand what really happens and he will tell you the truth about the process . . . the good, the bad and especially the ugly.”  For this as well as other references see my LinkedIn profile at http://www.linkedin.com/in/jwhansen.)

 

Please do not misinterpret what I am saying.  I am not adverse to a particular idea or standard for the mere sake of being disagreeable.  What I am saying is that left unchecked or unchallenged, even the best intentioned concept can and usually does lose touch with the evolving reality of a given situation.  Or as Colin Powell put it in one of his better known speeches (and I paraphrase), “one should always seek the advice of experts, but remember that they too may have reached their peak in terms of relevant knowledge.”

 

And this of course illustrates the inherent dangers of attempting to create a universal standard of operation and broadly applying it across a specific enterprise, let alone an entire industry sector or sectors.   One such example of popular thought gone awry is the persistent belief in the merits of vendor rationalization strategies.  (Note: refer to my November 27, 2007 article titled The Continuing Dangers of Vendor Rationalization – https://procureinsights.wordpress.com/2007/11/27/the-continuing-dangers-of-vendor-rationalization/).

 

A New Lens

 

“Jon Hansen is very knowledgeable and articulate on this topic we affectionately call eProcurement, and I believe that he is really one of the few who have been able to truly visualize the multi-faceted aspects of what can make it work.” 

 

Director, eProcurement Bureau of the Commonwealth of Virginia

 

This as well as other, similar comments mean a great deal to me because they demonstrate my passion for supply chain practice and validate my commitment to provide my clients with a new and unique lens through which they can truly see the dynamics that define and influence their organization’s operations.

 

From Warehousing and Distribution Planning to the effects of Double Marginalization within a Decentralized Supply Chain and Sustainable Procurement Policy Development, I am both eager and determined to serve you and your organization’s best interests.

 

The following is just one of the many examples or case references in which my methodologies have produced tangible results sooner and at a significantly lower price than that of a more traditional or contemporary approach.  (Note: If you would like a copy of this or any other Case Study in their entirety, send me an e-mail at procureinsights@rogers.com with “Case Study” in the subject line.)

 

Client Challenge

 

A major metropolitan transit authority contract established a target Service Level Agreement (SLA) for service call resolution of 90% same day (on-site 3-hours) to support their critical IT infrastructure.

 

Solution Methodology

 

Utilizing a consumption forecast model developed internally (Part Requirement Rate Formula or PRRF) my analyses was able to accurately forecast the frequency of consumption of specific parts for a particular device type based on the current install base.

 

Once consumption rates were established by device type, a Product Compression Function (PCF), a model which was also developed internally, was employed to substantially reduce the number of inventoried part numbers or SKU’s by approximately 85% without negatively impacting contract performance.  (Note: often time inventory levels grow as a result of inefficient sourcing practices versus increased service demand.  Instead of focusing on the implementation of a WMS, a great many organizations would benefit from challenging the logic behind the maintenance of current inventory levels.)

 

This ability to intelligently reduce inventory levels generated significant and unexpected savings for the client as they were able to a) lower their investment in inventory, b) reduce warehousing and associated costs, c) eliminate product variables for their field technicians, d) establish a more proficient life cycle management process, and e) capitalize on volume discount contracts when such a strategy made the most sense.

 

Once inventory levels were reduced to reflect the realistic requirements of the contract, the remaining product was systematically dispersed utilizing Strategic Stocking Locations (SSL).  Through a central application known as the Interactive Parts Ordering System (IPOS), an advanced time zone algorithm was employed to ensure prompt and easy access to the right inventory, from the right location at the right time.  This was accomplished through the development of a real-time polling mechanism which, within a matter of seconds, ascertained the SSL site that was best suited to meet the delivery requirements for a specific service call.  This same methodology was also used on a national basis to effectively manage the delivery of military-related service products to 35 geographically dispersed bases across Canada.

 

While the establishment of the SSL sites and the corresponding introduction of the IPOS application enabled the transit authority to surpass the 90% SLA requirement of the contract, challenges with service calls for which the required product had not previously been requested or, for which historic requirements were sporadic remained.  In response to this problem, a process was incorporated to both establish and utilize Strategic Geographic Suppliers (SGS).  The SGS is a variation of the cluster concept that has historically been employed by manufacturers.

 

SGS Overview

 

Here is an actual example from a separate case study of how the SGS process was utilized for procuring products that were not available from inventory.

 

The end-user client stipulated a 3-hour response time to support a centralized server farm or network located in the heart of New York City.  Critical to their day-to-day operations, strict adherence to the 3-hour SLA was contractually required, with corresponding penalties instituted when said levels were not achieved.  

 

When an essential cooling device failed an attempt was made to obtain the product through normally established channels (i.e. channels of distribution in which a traditional model had been referenced).  The estimated time of delivery was 2 to 3 days.  (Note: see the Model References links at the conclusion of this post to learn more about the differences between traditional models and the emerging models that are redefining supply chain practice.)

 

While the client had established “company-wide” sources throughout the United States, they had neglected to establish strategic sources within designated “hot zones,” or areas in which the SLA requirement called for a same day or better response/resolution time.  (Note: this oversight is usually a by-product of a centrally established, broadly applied vendor rationalization strategy.)

 

By establishing a regionalized SGS program, the very next time a requirement for a critical component arose, the needed product was located and delivered within the designated 3-hour time period.  And at a much lower price than that of the centrally negotiated volume discount contract.

 

Results

 

Collectively, these innovative approaches generated tangible results at multiple levels which in turn was reflected in increased end-user satisfaction and quantifiable bottom line savings.  Savings it is important to note that were commensurate with finance department standards.  (Note: refer to my January 31, 2008 article titled Bridging the Communications Gap between Finance and Purchasing, to understand why the majority of savings claimed by purchasing departments are rarely reflected in company financials – https://procureinsights.wordpress.com/2008/01/31/bridging-the-communications-gap-between-finance-and-purchasing/)   

 

A Passion for Service

 

Once again, the above case reference is indicative of the thought process and methodologies that I employ to identify the unique characteristics of a given situation and then prescribe a course of action that usually exceeds my clients’ expectations.  To do this on a consistent basis however, requires a willingness to eschew “standard” or popular theory in favor of creative ideas that are based on sound business principles.  To be succinct, thinking outside of the box does not mean taking unnecessary risks.  It means having an open mind that is capable of recognizing and adapting to dynamic real-world changes as they occur.

 

Regarding my consulting fees, they are structured on a sliding scale that is based on the type of project and size of the company that seeks to use my services.  Satisfaction is not just guaranteed, it is promised!

 

“Jon provided a detailed assessment of a proposed business process in a matter of days.  His perspective was insightful on a number of levels and I appreciated the depth of his experience and knowledge of best practices.”

 

Chief Procurement Officer, Multnomah County

 

Contact me at jhansen@procureinsights.com, or via telephone at 613-231-7116 to make me a member of your team.

 

 

Model References:

 

Optimization Modeling and the Modern Supply Chain (A PI Q and A): https://procureinsights.wordpress.com/2008/03/18/optimization-modeling-and-the-modern-supply-chain-a-pi-q-and-a/

 

Similarity Heuristics, Iterative Methodologies and the Emergence of the Modern Supply Chain: https://procureinsights.wordpress.com/2008/04/08/similarity-hueristics-iterative-methodologies-and-the-emergence-of-the-modern-supply-chain/

 

Is Ford’s auto-xchange the “Real Deal”: https://procureinsights.wordpress.com/2008/04/11/is-fords-auto-xchange-the-real-deal/

 

 

Lead Facilitator for KM Value Network (Ontario Knowledge Cluster): https://procureinsights.wordpress.com/2008/03/27/km-value-network-ontario-knowledge-cluster-launched/