Image by Nicolas Will, CC license

Behind every idea is a set of assumptions.  These assumptions can be exposed by simply by asking “why”?

When it comes to good technology management, it’s your job to test these assumptions, to kill the losing propositions or to make them more viable as sound investments.  Sometimes these assumptions are wrong – and a lot of them need to be right in order for a project to succeed.

Many people don’t realize the number of assumptions they make when a technology project is launched. Among them:

• what they saw in the demo or pilot will work in the real world;
• the software will meet all the business requirements that were specified before the project started;
• the team won’t have to make any customizations other than what was already identified;
• users will quickly learn and accept the new system;
• the project will be completed on the promised date.

In my book I described a hypothetical conversation between a manager and a CIO/CEO.  The manager was explaining that “the new system will give us real-time visibility of our vendor inventories and plant inventories, and instead of waiting for reports we’ll see our inventory positions and planned production and receipts real-time.”

Taken at face value, this statement implies acceptance of the following assumptions:

1. The way we think of “real-time visibility” of inventories, production and receipts is the same as what the system can provide.
2. The view of said data will be in a useful format and will provide all the data we need to make better/faster decisions.
3. These better/faster decisions will enable us to let our customers order within a shorter lead- time window and will reduce our on-hand inventories.
4. The savings from lower inventories and the additional sales from our late-order customers will more than pay for the cost of this new system.
5. A change in business process (i.e., how we manage inventories and production) would not produce these same benefits.
6. Out of all of the possible system solutions this one is the best choice from an IT strategy, cost and ongoing support standpoint.

A pause for a minute to question these six assumptions may well be the most valuable minute ever spent on the proposed project.  All kinds of havoc and wasted money can be avoided just by testing these assumptions.

And as you can see you don’t have to be an IT expert to successfully manage technology.  You just have to use common sense, by testing the logic that if we do X, then we will receive Y benefits.  If you are going to invest in technology, you may as well do it the right way.

Image by Joel Bez, CC license

Digital commerce isn’t just about selling your goods on the internet; it’s also about digitizing the whole flow of information in your company. Loads of activities within your enterprise can benefit from simple digital technologies, such as Optical Character Recognition (OCR).

Writing about OCR is right up there with writing about advances in FM radio, right? OCR is like what, from the 70s? And haven’t most companies digitized most or all of their paper documents?

No.  Where studies have been done, they have found that, for example, more than half of U.S. businesses still use paper invoices, and globally less than 10% of total estimated invoices are paperless.

And, OCR + software = big benefits.  Advanced OCR has

• Template-matching so that the software looks for and finds the right value in the right place on the page;
• Self-learning whereby word and character images are compared to a standard over time and the software learns which images have high probability of a match; and
• Re-purposing of the digital content created from paper scanning.

These advances have opened three large avenues of opportunity for nearly every business.

Audit.  Anything on paper documents can be compared to digital contracts, shipping documents, tax laws, official government documents, calendars, tariffs, tax tables, utility rates, pricing tables, or any other established numeric parameters.

Exception Management.  Everything that is digitized and audited against numeric parameters will have a result: the value is within the contract limits, matching the contracted rate, etc.  Exceptions can be identified, routed to email, returned to sender.  Reports can be written that summarize number of invoices processed and paid according to contract parameters, and number rejected, along with the contents of the rejected invoices.

Analytics.  Tens of thousands of paper documents (like Bills of Lading) of which thousands may have adjusted quantities or notations can be isolated, summarized and categorized.  Patterns can be established depending on the item, customer, delivery point, or mode of transportation.

Plenty of vendors will sell you software, but why bother – its much easier to contract with service providers. Better yet, outsource the whole business process; this has at least three advantages: 1) no software to buy and maintain; 2) low per-document and per-transaction costs you could never achieve on your own, and 3) flexibility to apply a variety of business rules to filter, sort, check, route, summarize and analyze data from documents.

Use a service provider with solid technology credentials and demonstrable abilities to do more than just convert paper to digital files. Your provider should be able to demonstrate profitable “use cases” where other companies have already achieved success. And the service partner you choose should have multi-language capability and knowledge of legal document retention rules for countries around the globe.

Please choose the door through which your next software vendor will take you.  Image: Doors of Dublin, by Tim Sackton, edited to fit 569 X 368px, CC license.

Selecting a software vendor is difficult at best in the 21st century; here are some must-have criteria, in addition to, but perhaps more important than, cost and time:

Does it solve my problem? Does the software company’s system solve your business problem? Does its existing functionality match the business requirements you drafted?
Does it pay back? Do the financial benefits from the solution pay back the total cost of implementing it in three years or less?
Do I understand all of the solution’s costs? Have you accounted for initial license, recurring support fees, custom development costs for changes you want to make to the software, hardware costs, upgrades to your network bandwidth or operating systems on your current servers or PCs, the cost of the next version upgrade, the cost of consultants, of hiring backup staff for project team members, and travel?
Is the solution in line with my strategy? Does the system match your criteria for what types of information solutions you will invest in, now and in the near future?
Do I understand all of my alternatives, besides this particular vendor? Have you done your homework regarding software options available? Have you constructed an evaluation matrix and compared all the alternatives to one another?
Does my team have the time and skills to implement this solution? Can you secure near full-time people to manage this project? Is the system easy to learn? Is it intuitive? Has your team evaluated it and are they comfortable they can master it?
Do my users have the aptitude to learn it and become proficient? Can you envision your end users quickly learning to use all aspects of the software? Are there enough users who could become proficient enough to serve as key users and help other users with training and troubleshooting?
Does my team fully understand how this solution will integrate with the company’s other systems? Has the vendor demonstrated to your satisfaction the ease with which the system will integrate with your other systems? Are other enterprises already running the software with systems like yours? Try to get at least a conference call with those references to gauge the level of integration complexity.
How risky is this particular software alternative compared to others? Can the software be phased in without interrupting the business? If the solution fails or the team encounters startup problems, how easy will it be to keep mission-critical activities running?
Vendor reputation. How many enterprises are using the vendor’s software, and for how long? Get references and check them.
Can I find programming help in the open market? If you need customizations, can you readily find people to do the work? Or are you locked in to using the vendor to make all your changes?

All of this is of course after you have submitted and reviewed detailed RFPs from the most appropriate vendors.  You can build a grid or a table, with vendors/solutions across the top and your most important criteria down the left hand side, and weight the relative importance of each. The result is an overall score that points you to a solution that best fits your needs.

Image: Diagram of the control panel in the cockpit of Apollo 13’s Lunar Module Aquarius, which circled the moon in April 1970, by Steve Jurvetson. CC license.

Nearly all new applications you add to your enterprise will need some level of connectivity to your existing systems, as well as to systems outside your enterprise, and so integration is a key part of your implementation plan.

The problem is this: every software firm will tell you their application can be integrated to just about anything. Yes, anything is possible, with enough money and effort.

Here are some key areas you should be familiar with:

An Application Programming Interface (API) is a protocol used by software components to communicate with one another. It can be source code, or written specifications. A good question to ask the software vendor is whether it has developed APIs for interfacing with other programs, and which programs in particular.

You’ll still have work to do if the vendor has well-developed APIs, but at least you’ll know someone sat down, thought about, designed, built and tested some form of integration — all work you shouldn’t have to re-do. One area of the money pit avoided.

Electronic Data Interchange (EDI) is a standard for electronic messaging of commerce between two entities and frequently between two different systems. EDI was established in 1996 by the National Institute of Standards and Technology; it has widespread use around the world as a replacement for paper-based transactions between companies.

The application you’re considering or your company may use EDI as its standard method of interfacing other systems, especially outside your enterprise, and that is fine. But don’t assume that EDI means it’s as easy as plug and play, because while EDI is supposed to be a standard, it has been customized by enterprises for their own specific needs and has many formats, and in addition there are two standards for every EDI message — UN/EDIFACT, and ASCx12. It’s not unusual for companies to maintain 20 or 30 or more partner-specific EDI data maps.

EDI has limitations: It’s prone to failure if data is incorrect or not recognized by the recipient’s system, or if changes are made to its structure without thorough testing. EDI is also like sending data through a tube — no one sees the data except the sender and the recipient, so if you want to exchange data or transactions with another trading partner you have to build another tube.

Don’t underestimate the time and cost of integration via EDI. My experience with EDI is that it takes a team of people to maintain it; to monitor the pipes, to push through transactions that have stalled or encountered errors, and to develop new connections or changes to existing ones. If EDI is how you will integrate applications, just be aware of the costs and effort involved. [pullquote]EDI is not standard, not necessarily low cost, and certainly not 100% reliable.[/pullquote]

If EDI is the way your customers want to exchange with you, you will have to accommodate. To mitigate the negatives of EDI, you can contract with one of the business-to-business (B2B) commerce companies that have emerged in recent years. These firms – GXS/OpenText, SPS Commerce, IBM/Sterling Commerce – among others — will host your EDI integration, monitor your connections 24×7, react to and solve messaging failures, and map new connections to trading partners.

Image by Marcos Gasparutti, CC license

In their recently published book, “Big Data: A Revolution That Will Transform How We Live, Work, and Think,” Viktor Mayer-Schonberger and Kenneth Cukier say that big data will provide a lot of information that can be used to establish correlations, not necessarily precise cause and effect.

But that might be good enough to extract the value you need from big data.

Three examples from their book:

1. Walmart discovered a sales spike in Pop-Tarts if storms were in the forecast. The correlation was also true of flashlights, but selling more flashlights made sense; selling more Pop-Tarts didn’t.
2. Doctors in Canada now prevent fevers in premature infants because of a link between a period when the baby’s vital signs are unusually stable, and, 24 hours later, a severe fever.
3. Credit scores can be used to predict which people need to be reminded to take a prescription medicine.

Why did the people involved in the above examples compare such different sets of data? One possible reason: because they could – relatively quickly and at low cost – this was made possible by superfast data processing and cheap memory. If you could mash together all kinds of data in large volumes – and do so relatively cheaply – why wouldn’t you until you found some correlations that looked interesting?

You can begin experimenting – a process I endorse — with Big Data. You need three basic components:

1. A way to get the data, whether out of your transaction systems or from external sources, and into a database.
2. Superfast data processing (a database with enormous amounts of RAM and massively parallel processing). This can be had on a software-as-service basis from Amazon and other vendors.
3. Analytics tools that present the data in the visual form you want. Vendors include Oracle, Teradata, Tableau, Information Builders, Qlikview, Hyperion, and many others.

Correlations are usually easier to spot visually. And visualization is where the market seems to be going, at least in terms of hype and vendor offerings. New insights are always welcome, so we shall see what sells and what doesn’t.

The assessment from Gartner seems about right to me at this point in time: that big data is both 1) currently in the phase they call the “trough of disillusionment;” and 2) promising enough that its use in BI will grow sharply.

Nearly every discussion about the evolution of the modern supply chain is about technology – big data, the internet of things (IoT), analytic platforms, and the tools used to reach digital channels. But little is said about the supply chain talent shortage.

In fact, in a recent study only 38% of supply chain executives felt confident they had the right skills in their organizations.

Why does the supply chain skills shortage exist?

Theories include:

• A negative perception about supply chain work (young people think it’s not cool)
• The fact that there’s a lack of women in supply chain roles
• The exiting of baby boomers from the workforce.

These seem to ring true. When I’ve attended supply chain conferences and scanned the crowd there, what did I see? Middle-aged men.

I have another theory: most supply chain jobs are boring. Ship stuff in. Ship stuff out. Type data into a computer. Transfer data from one system to another. Scan documents and send them somewhere. Look up stuff in tables. Fix problems in failed transactions. Yawn!

Tedious and repetitive tasks are still the norm

Despite the hype about how technology is revolutionising the supply chain, software and other tools that are used to eliminate the numerous tedious and repetitive jobs have not yet been widely adopted. Why? Because most large enterprises are risk-averse and slow to change (a topic for another blog).

The problem with supply chain processes

Two areas that suffer from energy-sapping tedium are order processing and logistics claims processing. These tasks, problems, and processes are the same day-in and day-out.

But while some companies have hundreds of people processing orders and claims, the irony is that these same companies have adopted technologies such as an ERP system and EDI – but they still need people to shepherd transactions in and out of systems. I know of companies who have used EDI for years and still have a human being checking every single EDI transaction for accuracy! (As an aside, just imagine what would happen to your orders if your customer service representatives disappeared!)

Why is all this important?

Read the rest of the blog here to find out why

Image: Balzac Fresh Food Distribution Center, by Walmart

Few areas of the software market in the past ten years have been as hot as supply chain.

Supply chains in many industries have been trying to cut costs out of distribution networks while reducing order lead time and inventories. They want solutions for modernizing what has traditionally been a backwater: truck booking; warehouse management; pallet management; order picking; truck loading; yard management; and delivery discrepancy management.

This category also includes software for demand forecasting and optimal product deployment throughout a company’s distribution network. Demand planning software can be fraught with peril for companies lacking the discipline and attention to detail needed to master these applications. These applications can be difficult to evaluate, from a buyer’s standpoint. Proceed with caution.

Companies in the supply chain space, known as SCM, (supply chain management), include industry leaders Oracle and SAP, and firms like JDA Software, Manhattan Associates and Red Prairie (recently merged with JDA). JDA is a firm that has grown by acquiring industry-leading supply chain management applications such as i2 and Manugistics. The company claims that 6,000 firms worldwide use its SCM software.

Supply chain applications can be single-purpose or inter-connected, like an ERP system. The supply chain is like a business-within-a-business: it has at least five processes that must be interconnected in some way: 1) demand planning (what will customers order?); 2) distribution network planning (where should we store it before it is shipped to the customer?); 3) manufacturing scheduling (how much should we make, when?); 4) material requirements planning (MRP – what raw materials & supplies do we need?); and 5) warehousing, transportation, and shipping (store the product and ship it to the customer when needed).

A single-purpose application (Demand Planning, Warehouse Management, Transportation) will claim to solve your problems in one or maybe two of these areas. An inter-connected supply chain application will manage all five of these areas. Vendors that offer an inter-connected solution will present themselves as offering total SCM, or supply chain management, solutions.

It’s hard to carve up the supply chain and say one application is better in one area than another, because probably the most important thing is the integration between the five main segments of demand planning, distribution planning, manufacturing scheduling, MRP, and warehousing and shipping.

If you had to choose, the demand planning software might be most important, unless your customers place orders way in advance of shipment; on the other hand, you might have multiple manufacturing locations or warehouses and you need a solution for where to make and ship your product most efficiently.

There’s a debate going on in B2B commerce about “touchless” sales order processing. Touchless order processing just means you don’t need a human to watch, review, check, or do anything else to an order when it’s received from the customer, like making sure product codes and pricing are correct. On the one side you have touchless believers (in part because that’s what they already do), and on the other, advocates of automated checks plus a quick review by human eyes, called “click and go.”

Many companies have already achieved touchless orders on a very high percentage of their order volume, and you need to look no further than Amazon for a very simple example of completely automated order processing. On any given Saturday morning, you, along with thousands of others, made a one-click purchase on Amazon. That order made its way to a fulfilment center uninterrupted by human scanning because of interconnected software.

Getting there is not hard

Touchless order processing is best achieved with the right combination of data capture tools and algorithmic checks based on your company’s business rules and customer master data.

The key element of a touchless order is the format, quality and consistency of the message. In other words, it’s all about readability – regardless of whether it is a structured, typed form (such as a spreadsheet), a fax, or an electronic form filled out via an internet/web portal, or the standard EDI purchase order. Algorithmic checks can be written for just about anything – if customer order date is X, then send order to Y. Many companies, realising they need these kinds of checks, start building them in their ERP systems using inflexible custom code.

But before long these DIY firms end up with a lot of expensive software modifications as they seek to automate more and more of their inbound order steps. I know of one company whose order checks are so complex that some of their large customer orders can take up to several hours to process. As a result, their customer responsiveness declines.

But aren’t human checks better? No.

Read the rest of the blog here to find out why

A data visualization of LinkedIn connections. Image by Luc Legay, CC license

Frank Luntz is a professional pollster who uses the visualization of data to show the sentiments of viewers as they watch political ads. The technique uses a moving second-by-second graph to show when exactly during an ad viewers felt positive or negative toward the content of the ad. Viewers use a handheld device with buttons for positive and negative, and press each one according to their sentiment as they view the ad.

Mr. Luntz could have simply had each viewer fill out a questionnaire about the ad – what did they like and what didn’t they like? You would then see numeric totals and percentages related to each question, but you wouldn’t see exactly when during the ad viewers had positive or negative feelings. The second-by-second gathering of data draws a much clearer picture.

That is what data visualization is about.

Many software vendors offer products in this category and many of those vendors are start-ups. Some claim the ability to merge all kinds of data – including Twitter feeds — into a coherent picture. This may be the case but my advice is to treat this area as very formative – i.e. not yet mature and therefore somewhat experimental.

I think technology will make it easy to index every single event in your enterprise and to display in real time a visual interpretation of all of those events interacting with one another. Executives and managers will no longer look at static tables of numbers or even graphs or charts; they will be able to “watch” their business in real time and see a future visualized picture of their business, much like a weather forecast is shown in graphical terms.

Some advice, if you want to experiment in this area:

• Find an area of your business where there is complete mystery, and where a vivid picture holds promise for a breakthrough development;
• Make sure you have a way of capturing the data;
• Try and buy: vendors will often conduct a pilot for you at little or no cost

The short answer to why corporate software costs so much is that implementing it takes so long, even if everything goes perfectly, which happens exactly as often as Haley’s Comet passing through our skies. It’s expensive for one reason: specialized, and therefore expensive, skills. It takes expensive skills to:

• write the software in the first place;
• modify it to your precise business needs; and
• install and test it and fix problems before you can use it.

The three biggest cost buckets of a software investment are implementation, software modifications, and the cost of delays or disruption to the business.

What is “implementation”? It is the process of making your business function using the new software, or “integrating” the software into your business, however you choose to look at it. Companies have different philosophies about this; some insist the software must be modified to accommodate the way the business functions; others believe in keeping the software as “vanilla” as possible by changing processes to fit the way the software was designed to work.

There is probably a happy medium.  I think the more you modify a program the more trouble you can expect.  It is not unusual to spend a (low) percentage of the project cost on modifications.

“Implementation” is also the process of matching each step in your business process to corresponding steps in the software. A business “process” is usually something like “ship a customer order” or “receive a shipment from a supplier.”

There might be 100 or so distinct business processes in a company, each with five to eight steps or transactions involved, so a software implementation could involve matching all of those 500 to 800 steps or transactions to the new software, and that takes time, knowledge of your business, and knowledge of the new software.

That’s why implementations are expensive: high cost per hour multiplied by many hours.

But if a perfect project is expensive, imagine how expensive a delayed or failed project can be. Failure is the norm, according to some studies, defined as over budget, not meeting implementation dates, or not delivering functionality as expected.

I would add to that list, from personal experience, failure also includes unexpected business disruption, like temporarily shutting down a manufacturing plant or shipping to your customers a day late. So the fact that software implementations are perceived to be wildly expensive is not just because software implementations are wildly expensive anyway – they also have a high failure rate, which only adds to the cost.