Monthly Archives: May 2007

Critical Purchasing Officer

In a recent CAPS Research publication “Supply Leadership Changes” they point out that few decisions that affect the success of supply in an organization will have more impact than the decisions regarding who will be the CPO and to whom he or she will report.

The report had some interesting findings:

  • There were a total of 73 CPO changes and 75 reporting line changes in the 30 companies studied over a 10 year period.
  • There was a total of 29-first CPO appointments in the 30 companies studied over the 10 year period.
  • The centralization of supply at a firm was typically triggered by a simultaneous corporate strategic change and move towards centralization of many functions, and trigged the establishment of the fist CPO in 22 of 29 instances.
  • In 5 of 29 cases, the first CPO was established when the executive team recognized that centralization of supply would gain the corporation a variety of benefits.
  • Initial CPOs and replacement CPOS are typically found within the company more than they are not (62% and 73% of the time).
  • When a CPO was recruited outside the company, the CPO came from a supply position.
  • An internally recruited CPO with a supply background had an average tenure of 4.3 years while an internally recruited CPO without a supply background had an average tenure of 3.5 years, but first-time CPOs with a combination of supply and non-supply experience had an average tenure of 5.5 years.
  • CPOs leave their position for a variety of reasons, the most common being promotion to another position. Other common reason are major corporate strategic and structural change and a major corporate strategy strange.

These findings, and other, have some interesting implications:

  • Leadership in the top supply function is in a state of constant flux and getting a running start at the position is important.
  • The trend toward the appointment of non-supply managers to the CPO position is continuing and a significant burden of education and support falls upon the shoulders of the senior supply managers with supply experience.
  • Individuals aspiring for the CPO position need to move to a corporate supply position.
  • The CPO and the person to whom he or she reports forms a powerful team within the organization.
  • A new CPO must create a plan of action.

This might imply that:

  • A supply manager should constantly be improving herself. Continuing education and awareness is critical. ( Blogs contribute to awareness. )
  • A supply manager should be ready for increasing responsibility.
  • Corporate supply is where it’s at.
  • If you want to be a powerful CEO, get a great CPO.
  • A good plan is important.

Have you checked your French Stereotypes lately?

The classic stereotypes of slim suave beret-adorned Pierre, arrogant in his self-conceit, doing his best to charm every vixen who passes his gaze; or of snooty waiter Michelle, head high to the sky, gaze anywhere but on his customer, and disdain dripping with every syllable he mutters; or of distant temptress Marie, with ruby red lips, full, wavy, lashes, a shiny telescopic cigarette holder in her right hand, a new dress straight from the Paris catwalks, and a sultry attitude that makes Englishmen feint are out of date.

Psychologically, our entertainment and culture has led us to classify the French as a snobbish, arrogant, rude, and impolite country of people who are in love with their wine and cigarettes and disdain Americans. Well, a recent opinion study carried out for the International Herald Tribune and France 24 TV station found out that this is only partially true. The French do carry a lot of disdain, but they do it for themselves! In fact, they seem to dislike themselves even more than Americans who have negative stereotypes drilled into them by classic cinema and cartoons on a regular basis! The study found that while only 38% of American respondents had a negative view of the French, 44% of the respondents from France thought negatively of themselves! Wow! Gives a whole new meaning to the French Twist.

More Kudos to Tony Poshek for digging up this article as well. He really is The Cynical Sourcerer!

The Real American Fat Farm

Why does America have an obesity problem?

Because junk food is cheaper than health food, and when your average American is on a budget, especially a tight one, the most rational economic strategy is to eat badly – and get fat.

Why are a pair of Twinkie’s cheaper than a bunch of carrots?

Because most junk food is a clever arrangement of carbohydrates and fats teased out of corn, soybeans, and wheat – crops that are typically overproduced relative to American needs. Thus, these foods can be produced more cheaply than other foods.

Why do farms grow so much corn, soy, and wheat?

Well, despite what you might think, it’s not another biofuel blunder – but a blunder of the most basic kind. Policy. The current farm bill supports five commodity crops: corn, soybeans, wheat, rice, and cotton and agricultural policy has been designed in such a way as to promote the overproduction of these commodities. Basically, the current farm bill cuts farmers a check based on how many bushels they grow rather than by supporting prices and limiting production. This results in a food system awash in added sugars (from corn) and fats (from soy) as well as cheap meat and milk (from soy and corn). In comparison, it does almost nothing to support farmers growing fresh produce. The proof, as they say, is in the pudding. Between 1985 and 2000, the real price of fruits and vegetables increased by nearly 40% while the price of soft drinks (liquid corn) dropped by 23%.

A public-health researcher from Mars might legitimately wonder why a nation faced with what its surgeon general has called “an epidemic” of obesity would at the same time be in the business of subsidizing the production of high-fructose corn syrup. But such is the perversity of the farm bill: the nation’s agricultural policies operate at cross-purposes with its public-health objectives.

But that’s only part of the problem! The farm bill also impacts what children get served at school. The state-of-affairs is such that a lunch program that tries to prepare a healthy meal with fresh food is likely to get dinged by U.S.D.A. inspectors for failing to serve enough calories, but if the same program dishes up a lunch of chicken nuggets and tator tots, the inspector smiles and cuts a check. In other words, American children are the human disposal unit for all the unhealthy calories the farm bill encourages American farmers to overproduce. So, as the New York Times points out in their article You Are What You Grow, America does have a Fat Farm – the public school system!

Fortunately, the public-health community has recognized this and, along with a number of other communities, is endeavoring to do something about it. Let’s hope they succeed, and that you give them your support, or they may have to rewrite the pledge of allegiance to “… one nation under God, indivisible, with twinkies and ho-hos for all!”.

P.S. Kudos to Aptium Global’s Tony Poshek for bringing this article to my attention.

The Top Three X: It Keeps Going and Going

Chris Jacob Abraham of @ Supply Chain Management posted his forward piece on Supply Chain Management 2.0 in anticipation of his pieces on the top three issues in Supply Chain Management and gave us his first post on supply chain talent.

Randy Littleson of Kinaxis on Response Management posted his piece on strategy, strategy, and people.

Eric Hiller of Cost Cents [WayBackMachine] offered his initial post on “Design for … What?”.

But more importantly, a number of bloggers still haven’t entered the fray. Between non-stop travel (Vinnie Mirchandani), London Lag (Tim Minahan of Supply Excellence [WayBackMachine]), SAPPHIRE fixation (Jason Busch), last minute assignment (Greg Holt of CombineNet [acquired by Jaggaer] since Paul [Martyn] finally managed to sneak away for a short vacation), analyst schedules (surprise guest bloggers from Aberdeen and AMR [acquired by Gartner]), a burning need to do multiple posts (Chris Jacob Abraham and Eric Hiller), and the desire to build up anticipation (one or more surprise guest bloggers), the fray is destined to continue for another week. ( Of course, they might just be waiting for your adoration, in which case a comment on their blogs indicating how much you value their opinion and how great their last post was could speed things up. )

Low Cost Country Sourcing Leeriness

In addition to Carl Greppin’s (of Transpac Access) two-part interview over on e-Sourcing Forum [WayBackMachine], a few other decent articles have hit the presses in the last month or so.

The first article of note is Paul Snell’s “Sourcing Hotspots” article over on SupplyManagement.com which notes that LCCS is an intimidating subject to approach and that just knowing where to begin, where to go and how to balance the risks are enormous challenges for buyers.

The article starts by noting that before thinking about where you want to go, you must decide what it is you want to achieve and that reaching these decisions is an intensive process taking anywhere between two and six weeks. You will need a team of procurement people to dedicate themselves to the issue to make the right decisions.

Start by dividing the budget into a reasonable number of categories to identify where the biggest spends are and where the largest opportunities are. Once these opportunities are identified, they need to be weighed against the complexity of sourcing these products in a low(er) cost country.

If the consensus is that the savings that will be achieved are significant, start by selecting a small number of categories of the least complex items. If everything goes according to plan, you will have a foundation to build on and a small success story for the affected parties to buy into.

Be sure to meet the suppliers in person, and, preferably, visit their facilities before making a selection. This builds lines of communication and reduces the potential for (costly) mistakes. Make sure the suppliers selected are willing to break down their cost structure to help you evaluate where the savings will materialize.

The next article I found to be of interest was Mickey North Rizza’s Supply Chain Management Review article on “Revisiting LCCS in a Demand-Driven World”.

Mickey notes that exactly where you source overseas can make a significant difference on the bottom line but that for buyers to be effective and provide the right sourcing answer at the lowest total true cost, they need to understand the complete picture, including risks and supplier development. They need to understand LCCS within the context of a demand-driven supply network.

By purchasing a product outside of the country in which it had traditionally been purchased, the buying firm faces a number of challenges. The taxes, duties, customs, banking requirements, transportation, overhead of an international procurement office (IPO), inventory buffers, and long lead times from the point of shipment to the point of use can add up quickly in terms of costs. Add in language, culture, currency exchange rates, and timing factors… and the sourcing process can become a daunting task.

The article also notes that after a successful pilot program, companies find that sourcing agents, supplier-development engineers, and “in-country” expertise is required to cut costs and ensure continued reliable supply. The recommendation is to establish a procurement office in the country you intend to source from either by building the operations internally or engaging the services of firms that specialize in hosting those operations for you. However, it will still be the buying company’s responsibility to build out supplier-development and quality control infrastructure.

This article also makes the important point that technology applications can enhance the LCCS value proposition by streamlining work flows and providing collaborative opportunities among the network of buyers, services providers, and suppliers. It also reminds us that buyers need to become savvier, incorporating risk, supplier development, and soft- and hard-dollar costs in the total-cost-of-ownership equation. By doing this, they will gain a better understanding of the true costs in the sourcing equation. Smart buyers (1) focus on total delivered profit analysis vs. total landed or “true” costs and (2) explore “right shoring”. While offshoring provides clear reductions in the product cost, the associated overhead and processes required don’t always sustain the value.