Monthly Archives: December 2006

On the Seventh Day of X-Mas (Sourcing Strategies)

On the seventh day of X-Mas
my blogger gave to me
strategies for winning,
tactics for saving,
five golden rings,
four little words,
tri-focal lens,
two boxing gloves,
and a lesson in strategy.

Seven strategies you can use to increase your sourcing success are:

  • Spend Visibility
  • Supplier Performance Monitoring
  • Smart Country Sourcing
  • Collaboration with Strategic Partners
  • Innovation on Demand
  • Empowerment
  • E-Procurement

Spend Visibility

It’s not how much you spend, how you store it, how you cube it, or how you report on it – it’s how much you get, how you profit from it, and how you improve on it. It’s all about value, profit, and continual improvement. (Spend Matters Not) And that requires visibility – otherwise, you don’t know what you’re getting, whether you’re profiting from it, and what you need to be improving on.

Supplier Performance Monitoring

Supplier Performance Management (SPM) is a business practice that is used to measure, analyze, and manage the performance of an organization’s performance in an effort to cut costs, alleviate risks, and drive continuous improvement. The ultimate intent is to identify potential issues and their root causes so that they can be resolved to everyone’s benefit as early as possible. It’s critical because Aberdeen has found that companies with formal performance measurement programs are able to improve supplier performance by 27% and that enterprises that share performance data with suppliers generate 61% greater improvements in supplier performance than enterprises that withhold this data. For more information, refer back to my three-part summer series over on eSourcingForum (I, II, and III)

Smart Country Sourcing

Low cost country sourcing is good, but smart country sourcing is better. It’s all about being able to move quickly, as Jason points out over on Spend Matters.

Collaboration with Strategic Partners

Remember, two heads are better than one.

Innovation on Demand

A methodology to solve your tough problems. See my earlier post.

Empowerment

Real empowerment, not just lip service.

E-Procurement

Without eProcurement, you could find yourself buried in a stack of paperwork. Although the real savings come from sourcing, without a good e-procurement system, you will find yourself spending too much time tracking purchase orders, shipments, and payments. Considering that the bulk of your savings will come from strategic activities and not tactical ones, make sure you have a good eProcurement system.

On the Sixth Day of X-Mas (e-Sourcing Strategies)

On the sixth day of X-Mas
my blogger gave to me
tactics for saving,
five golden rings,
four little words,
tri-focal lens,
two boxing gloves,
and a lesson in strategy.

Six strategies you can use to save are:

  • Reverse Auctions on Commodity Categories in Competitive Markets
  • Sealed Bids on Strategic Purchases of Custom Goods or Services
  • Decision Optimization on High Value Goods
  • Process Re-engineering with Strategic Partners
  • Lane Optimization
  • Distribution Center Optimization

Reverse Auctions on Commodity Categories in Competitive Markets

A good post on Reverse Auction Selection Criteria can be found over on eSourcing Forum, where you can also find a good post on Reverse Auction Strategy and Reverse Auction Basics.

Sealed Bids on Strategic Purchases of Custom Goods or Services

If the category is strategic, you should not use a reverse auction or open-bid methodology and have suppliers compete solely on price – after all, quality will be just as important.

Decision Optimization on High Value Goods

An introduction to decision optimization can be found in one of my first posts on this blog and in my optimization series (I, II, III, and IV) over on eSourcing Forum. Additional information can be found in my CombineNet series (I, II, III, and IV).

Process Re-engineering with Strategic Partners

Streamline processes increases productivity. This allows you to increase spend under management and the savings you can generate.

Lane Optimization

Make sure you are using the right lanes at the right service levels from the right carriers. Otherwise, you could be considerably overspending on your transportation.

Distribution Center Optimization

See the fourth post in my CombineNet Series, BoB’s Unique Talents for a description of this process.

On the Fifth Day of X-Mas (Cross-Functional Sourcing Team)

On the fifth day of X-Mas
my blogger gave to me
five golden rings,
four little words,
tri-focal lens,
two boxing gloves,
and a lesson in strategy.

Five Golden Rings

Legal.
Finance.
Sales and Marketing.
Product Development.
Human Resources.

A good procurement/sourcing/supply chain department is at the intersection of each of these departments. It works with Product Development to understand their needs with respect to quality, reliability, and functionality. It works with Sales and Marketing to understand what product characteristics can be expounded upon to generate buzz or increase perceived value (and, ultimately, the sale price). It works with Human Resources to understand organizational values and qualities to look for in potential strategic partners. It works with Finance to understand cash-flow requirements and preferred payment terms. It works with legal to create the best contracts for the organization and to make sure they appropriately protect the organization against all foreseen risks.

Representatives of each of these departments should be involved to the appropriate degree from the get-go of any sourcing project to streamline the process. During RFP formulation, legal and finance can help you nail down the terms and conditions in the template contract to streamline contract signing down the road. Product Development and Human Resources can help you pre-qualify suppliers. Sales and Marketing can assist you in the RFP evaluations.

Involving the right stakeholders throughout the process will help you make the right decision every time and assist you in maximizing the value of each and every sourcing effort.

On the Fourth Day of X-Mas (Collaboration)

On the fourth day of X-Mas
my blogger gave to me
four little words,
tri-focal lens,
two boxing gloves,
and a lesson in strategy.

One of my favorite presentation titles at eyefortransport‘s recent Supply Chain Directions Summit in the San Francisco Bay Area was Coca Cola’s presentation “Winning Together“.

Coca Cola is now making a big push to improve its supply chain through collaboration and information sharing. According to Coca Cola, success depends on:

  • relationships,
  • communications,
  • commitments, and
  • visibility.

Ok, so these words are not so little, but they are fundamentally important. They define a blueprint for successful collaboration between you and your supply chain partners. As outlined in the presentation, the keys to sourcing success are not canned processes or over attention to metrics, but working as a team internally and externally with dedicated partners and by focusing on communication to customers when a shipment is in danger of being late, not on-time percentages, as this allows both parties to work together to resolve a potential problem before it occurs. Strong relationships are the key to success and sustainability – take the time to get it right!

The presenter also made the point that very little information is truly confidential, and that the best way to resolve issues and collaboratively improve supply chain performance is to put everything on the table. Share all relevant information with your partners, and give them anything else they ask for if it will help them help you. This isn’t saying that you should publish all your corporate information on your web site, you can always enter into two-way information protection agreements, but that you should not hold back in sharing with a partner trying to make your operations better.

Note that eyefortransport‘s sister organization, eyeforprocurement has a number of upcoming events next year custom designed for today’s procurement professionals, including the Supplier Management Forum next April in Miami. Registrations received before year’s end save $400 off of the regular registration rate and those who quote “sourcing innovation” in the discount code field save an additional $100.

On the Third Day of X-Mas (Emotional Intelligence)

On the third day of X-Mas
my blogger gave to me
tri-focal lens,
two boxing gloves,
and a lesson in strategy.

When coming up with a good strategy for your supply chain, you first need to understand that there will always be three views of the best decision, the procurement view, the logistics view, and the executive view. Your number one challenge could easily be the transformation of these viewpoints to a common viewpoint that permits a common solution.

This will probably require a lot of good negotiating skills, good listening skills, and innovative problem solving skills to propose designs and solutions that can appease everyone’s desires. This is where Jason’s Emotional Intelligence really comes into play. You have to see their viewpoints, understand their perceived problems, get to the real issue, and come up with solutions that can meet your needs and theirs.

Management will want the solution with the perceived lowest cost or highest profit, or both, logistics will want the solution that makes their life easiest, and you should want the solution that meets the needs of your stakeholders – engineering, marketing, etc. – while keeping your costs down. A narrow focus on lowest cost can lead to quality issues, a narrow focus on the easiest solution (local sourcing enabled by a national carrier that can meet all of your shipping needs) can overlook lower cost or higher quality sources of supply, and a narrow focus on minimally meeting your shareholder’s needs in a cost-controlled manner can overlook opportunities for innovation.

So not only do you need to be able to understand each of these viewpoints, you need to be able to see their strengths and weaknesses so that your team can collaboratively design an over-arching supply chain strategy that exploits all of the supply chain strengths available to you while blocking out the potential weaknesses.