Monthly Archives: May 2007

Got Talent?

Noting that it has been a while since my last Talent post, I went trolling for good articles. On the CPO Agenda site I found not one, but two great articles on talent development. Deep Sea Fishing by Adrian Done and Nurturing Talent: A Numico Case Study by Haide Villuendas from last fall’s Autumn issue.

In Deep Sea Fishing we are warned that purchasing functions often make the mistake of adopting a catch-all approach to competence development and that those organizations that fail to apply sufficient thought to developing appropriate deep sea purchasing competencies are destined to stay splashing in the rock pools; or worse, find themselves dangerously out of their depth in ill-conceived quests for the bigger fish.

According to the article, the key to success is the development of appropriate contextually-specific competence configurations that drive specific strategic competitive priorities in the most crucial areas. This is accomplished by formulating an appropriate framework for the dimensions of purchasing competence (which can start with the basic framework provided) and determining the impact of each of the purchasing competence dimensions upon performance.

Although blatantly obvious, step two is often easier said than done. Just because company A did X and experienced Y does not prove that X actually causes Y or that what will work in company A will work in company B. Although you can hypothesize there is a correlation between action X and effect Y, you cannot scientifically draw a far-reaching conclusion from a sample size of one. In order to determine the effect of a competence dimension, you need to establish appropriate objective and subjective measurements and take multiple measures. Then you will know for sure how important a given competence dimension is for your organization.

Of course, when designing, or re-designing, a purchasing function, you will likely not have the measurements you need to determine the appropriate competence dimensions. In this case, you can still proceed scientifically to arrive at a hypothesis of the appropriate dimensions. Conduct a study of what other organizations are doing and measuring and review the relevant literature. If you find two or three dozen studies and articles from reputable sources that all indicate a given competence dimension is relevant in your type of organization, than, chances are, it is not only relevant but will be relevant to your organization. Furthermore, if it is has been shown to impact one or more of the most common purchasing metrics, including the seven important metrics described in the article, it’s likely a sure thing. (The metrics listed are quality, on-time delivery, accuracy, cycle time, commodity knowledge, professionalism, and negotiating ability.)

By now you’re probably asking, just what is this competence dimension you keep referring to? A competence dimension is simply a meaningful measure of competence relevant to a purchasing department. The article lists six basic competence dimensions as part of their framework:

  • Employee Competence

    Personnel are well trained and have the ability to apply innovative ideas.

  • Empowerment

    Personnel are involved in key decisions, have autonomy, and have job security.

  • Internal Interaction

    Personnel regularly collaborate and share knowledge with each other and with other departments.

  • Product/Service Development

    Personnel communicate regularly with product and service development departments and assist in the early phases of new product development.

  • External Interaction

    Personnel collaborate and share knowledge with suppliers, do joint production and delivery planning, and share risk.

  • IT Competence

    Personnel use IT to achieve company-wide visibility on spend, use eSourcing to get the best value, and make continuous improvements to the procurement cycle.

Nurturing Talent tells us that it can be difficult to attract and retain top purchasing talent and that any organization that wants to do so needs to make a serious effort in terms of time, resources, and commitment. But more importantly, it also spells out what talent looks like to Numico and what talent should look like to you. Talent consists of three broad attribute categories:

  • Attitude

    etiquette, passion, and EQ: emotional intelligence

  • Brainpower

    analytical thinking, structured reasoning, and creativity

  • Knowledge

    general knowledge, qualifications, and relevant experience

Furthermore, attitude and brainpower are given priority – since purchasing specific knowledge can be taught as long as the person has enough brainpower and the right attitude, as could be evidenced by a university degree and a desire for continuous learning.

The article also provides some good advice for growing and retaining talent.

  • Renumeration

    Good buyers spend the bulk of their time asking what a product or service is worth – it’s only natural they’re going to ask what they’re worth.

  • Learning on the Job

    Not only does it give your organization a competitive advantage, but it gives a purchasing professional a sense of accomplishment and, when done right, fun!

  • Career Path

    Good procurement personnel are ambitious. They want to know that they can advance over time.

  • Mentoring

    This can make both the mentor and the mentored feel valuable and maintain your competitive edge as relevant knowledge is passed on within your organization.

  • Team Diversity

    Business is Global – and Procurement even more so. Encourage and support diversity on your team, who will enjoy learning about other cultures.

  • Say Goodbye with Grace

    Your top talent leaving can be a good thing! A recently departed employee can be an ambassador for your firm – promoting it to potential future employees and customers. Furthermore, if an ambitious employee left because your firm didn’t have the appropriate position for her at the time, there’s no saying that such employee would not be interested in returning in the future when such a position opened up. Since there is nothing more valuable than a dedicated employee who brings back knowledge of best practices from other companies, it’s important to make sure they leave on the best of terms.

Tough Times for the Oompa Loompas

Hershey is closing its last Canadian Factory, laying off 580 workers before year’s end, as well as plants in Reading, PA, Naugatuck, CT, and Oakdale, CA. At least in the latter case, maybe a few of the more energetic can go back to school and learn to sling code.

Times must be tough for The Hershey Co., especially since they are launching a suit against Kenneth Affolter for selling marijuana-laced chocolate candy, with names like Stoney Rancher, Rasta Reese’s, and Keef Kat whose packaging was similar to their own, for a mere $100,000 in damages. I find this laughable. I don’t think any one is going to confuse marijuana munchies with plain old candy bars – unless Hershey is planning on launching their own brand of Jamaican Jollies.

More kudos to The Cynical Sourcerer for his enduring efforts to make sure these sugary stories don’t get overlooked!

Aberdeen Takes a Tip from Madonna (with their Direct Materials Sourcing Study)

According to a recent brief from Aberdeen, at least when it comes to Direct Materials Sourcing, we are all Living in a Material World. The rest of us have known this since 1984 … so what’s the word?

Well, they are currently working on a Direct Materials Sourcing Study (and interested enterprises can take the survey. It seems that even though previous research found that over half of the enterprises indicated that an automated and standardized company-wide direct materials sourcing process is required, only 17% of enterprises have achieved such a level of standardization.

Aberdeen’s current hypothesis is that effective direct materials sourcing should include the following business processes:

  • Standardized Strategic Sourcing Initiatives Company Wide
  • Cross-Functional Procurement Teams
  • E-Sourcing and E-Procurement Solutions
  • Procurement Involvement in Product Development
  • Leverage of Outsourcing

And I have to agree. It also posits that Low-Cost Country Sourcing (LCCS) is a key strategy for effective direct materials sourcing. Here I have to disagree. I could be persuaded to accept Best-Cost Country Sourcing (BCCS), but since there are risks and disadvantages to low-cost country sourcing, and since some low-cost countries are not all that low cost, I believe a more objective, well-rounded total cost of ownership vs. value calculation is required.

Still, it will be interesting to see what they find out.

Gartner’s Global Trade Management Checklists

In the not too distant past, Gartner’s C. Dwight Klappich put out an article on Developing an End-to-End Global Trade Management Functional Map which, although not long enough, in-depth enough, or complete enough for the topic they were tackling, did contain a number of good check lists that you should review while putting your global trade plan together.

The check lists cover trade functions, trade compliance, movement of goods, and trade finance. Furthermore, they discuss global trade planning, monitoring and evaluation and indicate that global trade is a source of competitive differentiation.

Trade functions are defined as extensions to common business activities to recognize the nuances of conducting trade across borders. Major functions are:

  • Sourcing
  • Selling
  • Export (customer) orders
  • Import (purchase) orders
  • Collaboration
  • Product Management
  • Vendor Management
  • Document Management

Trade compliance functions address the activities that ensure that international transactions comply with and adhere to the rules and regulations of importing and exporting countries and the activities that involve insuring reporting, documentation, and financial obligations are met in a timely fashion.

  • Preferential Trade Agreements
  • License Determination
  • Document Management
  • Document Filing
  • Product Classification / HTS (Harmonized Tariff Schedule)
  • Customs Declarations
  • Import Rules
  • Export Rules
  • Duties / Taxes
  • RPS (Restricted Party Screening)

Move functions refer to all the activities needed to ship goods internationally.

  • Carrier Booking
  • Global Logistic Execution
  • Shipment Planning
  • Multimode Transportation
  • Shipment Consolidation
  • Shipment Routing
  • Carrier Communication
  • Global Visibility
  • Landed Cost Control
  • Shipment Documentation

Trade finance functions refer to determining the true total landed and delivered costs for trades, the calculation of duties/tariffs/fees/taxes, duty drawbacks, and collaboration with financial institutions for letters of credit, invoicing, and settlement.

  • Letters of Credit
  • Settlement
  • Reconciliation
  • Invoice Management
  • Payment
  • Insurance
  • Trade Finance

The also recommend evaluating the performance of your global supply chain from a trade management viewpoint regularly by way of scorecards, performance indicators/metrics, and analytic reports to diagnose potential problems early and determine remedial actions. Considering an interruption in your supply chain could lead to a major disruption, this is sound advice.

Democratizing Innovation vs. Crowdsourcing

Crowdsourcing, as I noted in CrowdSourcing (Purchasing Innovation VI) and Cambrian House: Crowdsourced Software, which can be defined as the process of delegating various tasks for which you do not have the manpower or expertise from internal production to external entities or affiliations of networked persons with the expertise, access to, or raw capabilities that you require, allows you to accelerate product development lifecycles and innovation by taking advantage of the masses.

Democratizing Innovation, the title of a book by Eric von Hippel, is when users develop solutions and manufacturers base their new product ideas on the examination of user-developed solutions as well as their needs. It is the intersection of the emergent-solution and emergent-market model where individuals innovate for themselves (with steadily increasing quality and steadily decreasing cost using steadily improving tools that are becoming cheap and ubiquitous) and manufacturers learn to rely on users for innovation prototyping and the collaborative filtering efforts of user communities as the basis of their marketing research.

The concept of Democratizing Innovation is discussed in an interview between Eric von Hippel and Tom Austin of Gartner, that, unlike most of Gartner’s offerings, is free for anyone who wishes to read it. The interview, which is quite lengthy, discusses various aspects of Democratizing Innovation, and includes references to open source and user-centered innovation (which are fundamental components of crowdsourcing), but the most interesting aspect is the reference to a concept of an “intellectual commons”.

Eric von Hippel states that he believes that many fields are on the way to building an intellectual commons, which is increasingly becoming a viable substitute for intellectual property protected by patents and copyright and that, over time, information protected by intellectual property law as a monopoly will only survive in increasingly isolated corners of the economy since intellectual commons will eventually dominate. Interesting proposition. I hope it happens … which should not be a surprise since I am all for the abolishment of software patents as well as much stricter controls on the patent process. (For example, I would argue that a patent should not be granted unless a panel of experts in the field agreed that the invention contained within was indeed innovative. Considering Genrich Altshuller, the founder of TRIZ, found that, on average, only 20% of patents have somewhat inventive solutions, only 4% of patents contain a new concept and 1% a revolutionary discovery, it should be obvious that at least 75% of patents granted should never have been granted.)

But I digress. We’re talking about crowdsourcing and democratizing innovation – two concepts that look eerily similar – despite the fact that the Gartner interview does not even mention crowdsourcing. After all, both are based on user-centered innovation, and the emergent properties of a social collective which will slowly redefine productivity and innovation in this modern era.

We’ve left the world of Marshall McLuhan where The Medium is the Message and have entered the world of William Gibson where it’s impossible to move, to live, to operate at any level without leaving traces, bits, seemingly meaningless fragments of personal information. But that can be a good thing. We can leave more than traces and meaningful fragments of non-personal information as well. Others can do the same. These fragments can be combined into pieces, pieces into images, and images into collages that can be used as the foundation for new innovations. The future is here. It’s just not widely distributed yet.