Monthly Archives: July 2007

Only You Can Prevent The Sky From Falling

Last week in The U.S. Bureau of Labor Statistics is Wrong. Dead Wrong!, I alerted you to a recent discovery of Tim Minahan’s that the U.S. Bureau of Labor Statistics latest report on the sector is that overall employment for purchasing and supply managers is expected to grow slower than the average for all occupations through the year 2014 and that demand for purchasing workers will be limited by improving software.

This is, of course, wrong. Now, Tim did note that the report states it was based on 2004 assessments, but it’s still a travesty to make future projections on stale data, especially data that does not represent the trends that are being corroborated by all of the major societies, publications, and research organizations in the sector, including the ISM, Purchasing Magazine, and Next Level Purchasing. Specifically, the demand is increasing, and new software is not limiting the demand for educated professionals – although it may be decreasing the demand for tactical purchasers – as it is significantly increasing the demand for strategic supply management professionals.

But the most interesting outcome was that even though Jason Busch and I whole-heartedly agreed with Tim, Charles Dominick had a different perspective, which he stated in Read Yesterday’s Purchasing Blogs? Don’t Panic! and The Purchasing Talent Crunch Paradox, the first of which drew commentary from Tim and the second of which drew commentary from yours truly.

In his first post, Charles states that the BLS report, which states that demand or purchasing workers will be limited by improving software, and that Tim’s post, that quotes numerous real-world examples of executives not being able to find the talent to fill their needs, are not in contradiction, because tactical purchasing jobs, which he associates with the BLS report, will decline as new procurement software is implemented and strategic purchasing jobs, which he associated with the talent crunch described in Tim’s post, will continue to increase. He’s right, but that doesn’t address the fact that the BLS report states to cover the industry as a whole, and if strategic purchasing jobs are increasing faster than tactical purchasing jobs are decreasing, than this means that the overall demand for professionals will continue to increase, as reported by the numerous surveys by the ISM, Purchasing Magazine, and others over the three years (or so) that have passed since the Bureau collected it’s statistics.

This at least partially invalidates Charles’ claim that the BLS was not incorrect in it’s statement that demand is expected to grow slower than the average. Charles correctly points out that “grow slower than average” does not mean decline, but, as Charles notes, this puts growth in the 0-8% rate, and every recent study I’ve read clearly puts growth overall above 0%!

Of course, the only way to answer this question precisely is to know the percentage of tactical jobs being lost to technology (and, as Charles points out, global outsourcing) and the number of jobs being created to tackle strategic sourcing. However, with the growing complexity of global trade (countless new regulations, security acts, regulatory acts, foreign trade zones, special economic zones, preferential trade agreements, etc, etc, etc), rising commodity prices almost across the board, corporate social responsibility, and continuing price pressure, about the only way left for a company to not only increase profits but remain profitable is through better sourcing and supply chain management. I believe this is going to cause a much larger spike in demand than the downward spike caused by the reduction of tactical purchasing jobs due to technology or outsourcing.

In Charles’ second post, he notes that even if he’s right, and the number of purchasing jobs being created is only slightly more than the number of purchasing jobs being displaced, there can still be a talent crunch. And even though we disagree on the magnitude of the talent crunch in the best case situation, this is one place we do agree. I’ve been bemoaning the talent issue for quite some time now.

Charles correctly points out that just because you’ve been in purchasing for years, that doesn’t mean that you are qualified for a higher level purchasing position. There is a big difference between the traditional purchase order processing of tactical purchasing and the modern strategic sourcing initiatives of strategic supply management. In some cases, the gap is so large that it’s not that large of an exaggeration (though it is an exaggeration) to say that, with the right rules-driven software, the first job could almost be done by a trained monkey whereas the second almost requires a candidate with a graduate degree.

To this end, Charles suggests that one of the reasons for the talent crunch is that some buyers are unwilling to invest in their own purchasing careers and are reluctant to advance their own capabilities. He bemoans the fact that he hears from professionals daily who complain that their employers will not fund training or certification. He also states that, considering the average salary, they should invest in themselves since they will likely earn that money back in a hurry. (And when you consider that professionals with a recent certification or degree are very attractive in the current market where an average qualified buyer can often get a 10% to 15% raise just by switching jobs, that’s no joke.)

Although he’s right, I think we need to lay a little more blame on the employer who states he can’t find qualified talent but will not invest in the talent he already has. When you consider Hackett’s recent findings that top-quartile talent management companies generated an average EBITDA of 16.2% vs 14.1%, a 22% improvement in net profit margin, a 49% improvement in return on assets, and a 27% improvement in return on equity, there’s no reason not to invest in your talent. So before we pass the buck to the professional, let’s make sure we pass it to the corporation that lays off a group of tactical purchasers instead of retraining them and then bemoans the fact that there isn’t a strategic supply professional to be found. After all, when you’re an executive, the buck always stops with you!

So, if you want to stop the sky from falling in the purchasing profession and escape the worst of the coming talent crunch, you, and your company, need to invest in career development now – before it’s too late. The talent crunch is coming! Almost 76M baby boomers in the US will soon be eligible for retirement – over 25% of the US population and over 35% of the US workforce, 25% of the world’s population reaches retirement age in the next 3 years, there are significant population declines underway in many first world economies, and, current studies indicate that employers estimate that 39% of their current workforce and 26% of new hires will have basic skill deficiencies. There’s just no avoiding it. But proactive planning and skills development can definitely minimize it and prevent the sky from falling.

What Got You Here Won’t Get You There

As a good follow up to last week’s piece on Managerial Delusions, Knowledge @ Wharton recently ran a piece titled on To Marshall Goldsmith: Thank You for Writing This Book that reviewed Marshall’s Goldsmith new book What Got You Here Won’t Get You There.

The article states that the power of the approach, and the book, lies in its simplicity, and the basic insight that good manners is good management. The review states that the book is built around the bad habits that keep highly successful people from succeeding even more. Basically the hypothesis is that, once a certain professional level is reached, neither intelligence nor skill accounts for the fact that some people continue to advance while others plateau. According to Goldsmith, the secret lies in behavior, identifying the hidden behavioral tics that are preventing you from succeeding and eliminating them, and, furthermore, recognizing the delusion that the behaviors that allowed you to advance to a certain point will continue to serve you.

The article then goes on to outline the “twenty habits that hold you back from the top” that Goldsmith discusses in detail in his book, but before we get to those, I’d like to point out that this philosophy mirrors the philosophy I have for successful companies – that what served you well yesterday is not enough to serve you well tomorrow. That’s why you need to continually improve, and innovate. This is what Goldsmith is telling you. He’s saying that, at a personal level, you must continually improve as a person in order to continue to achieve. I agree, but whereas he believes all of the answers are behavioral, I’m not sure I entirely agree. But it’s definitely part of the puzzle, and all of his insights are true, and one should definitely work to eliminate the bad habits he identified.

The bad habits, as summarized by the McKinsey article, are:

  • Hyper-competitiveness
    The need to always best others.
  • Adding too much value
    The need to always improve an idea, even those that are quite good.
  • Passing Judgement
    It’s not always required.
  • Destructive Comments
    Too much criticism, and not enough constructivism.
  • Starting with “No”
    Start with “Yes”, then modify.
  • Constant Bragging.
    Or, constantly flaunting your greatness.
  • Speaking when angry
    Good rarely comes of it.
  • Negativity
    Try to be positive instead.
  • Withholding information.
    As I continually try to impress, Collaborate, Collaborate, Collaborate, Collaborate
  • Failing to recognize.
    Others in the organization can succeed too. Recognize when they do.
  • Claiming unjustified credit.
    As with “failing to recognize”, it’s important to give credit where credit is due.
  • Making excuses.
    If you’re management, it’s important to remember the buck stops with you.
  • Clinging to the past.
    It’s important to learn from the past, but it’s also important to let it go.
  • Playing favorites.
    Rewarding suck-ups creates hollow leaders.
  • Refusing to express regret.
    There are times to say “I’m sorry”.
  • Not listening.
    Just not good. Not good at all.
  • Failing to express gratitude.
    There are times to say “Thank you” as well.
  • Punishing the messenger.
    Remember, as a manager, the buck stops with you.
  • Passing the buck.
    “The buck stops with you” means no passing!
  • Excessive need to be “me”.
    Well, as much as you want to be, you’re not perfect. Recognizing that and continually striving to improve is the best way to build commitment and loyalty.

There’s also a bonus bad habit, but you’ll have to read the book, or at least the McKinsey article for that one, just as you’ll have to refer to the book for his advice on overcoming the bad habits.

JLP Responsible Sourcing Part VII: Working Hours

In our last post, we discussed the importance of employee representation and their need to freely associate, corresponding to section F of the report. In today’s post, we cover section G of The John Lewis Partnership‘s Responsible Sourcing Supplier Workbook which covers working hours.

In some countries, such as Vietnam, Thailand, Indonesia, and China in particular, some workers routinely work 12-16 hours, 7 days a week, in peak periods. Even in the UK, studies have found that a surprisingly high proportion of workers in the food production industry exceed 48 hours per week (and even 60 hours per week) on a regular basis. Furthermore, it is often the case that workers are not allowed to refuse overtime. The facts reported in the workbook are staggering:

  • nine economies reported over 2,000 annual hours worked per person in the latest year for which data was available to the ILO
  • 17% of UK employees work more than 48 hours per week
  • one in four workers in the UK working long hours reported suffering a physical ailment or stress as a result
  • an estimated 1.3 Billion working days are lost each year in the UK due to stress-related illness
  • workers in China often work 360 hours per month, and some up to 400 hours per month, almost twice the legal limit

This issue should be tackled immediately if you think you may have a problem. You can start by doing the following:

  • keep good records;
    this will allow you to identify the “hot spots” where long hours are the norm and seasonal peaks
  • gradually reduce hours;
    this will reduce employee stress and exhaustion and will result in increased productivity without any additional action; furthermore, improved production planning, communication, and training will also result in increased productivity allowing for a further hour reduction if overtime is a serious issue
  • increase wages to a fair level;
    if many employees are working long hours by choice, then this is a sign that they are not able to make ends meet working normal hours and wages need to be raised; furthermore, the increase in employee contentment and decrease in overtime-related stress and exhaustion should make up for most, if not all, of the productivity loss
  • make sure all overtime is voluntary
  • ensure all employees have enough time off for rest and sleep; furthermore, ensure that they have at least one day off a week, even during seasonal peaks – this can be accomplished with proper planning
  • make sure management fully understands the law and the rules related to overtime;
    managers who don’t are more likely than the employee to be the source of the problem

In our next post, we’ll tackle the seventh major issue addressed by the workbook, that of equality of treatment. (You can access all of the posts in the series (to-date) by selecting the JLP category at any time.)

Supply Chain Humor This Week II

Before we get started, Hat Tips to Tony Poshek, The Cynical Sorcerer.

Oops! And you thought it was sickening when the USDA paid farmers not to farm! Well check out this doozy: “The Agriculture Department sent $1.1 billion in farm payments to more than 170,000 dead people over a seven-year period, congressional investigators say.”

About 12 weeks ago, we discussed The Real American Fat Farm and how the current farm bill supports five, and only five, commodity crops – corn, soybeans, wheat, rice, and cotton – and effectively pays farmers not to farm other crops while encouraging unhealthy lunches in American public schools. I didn’t think it could be worse than that … but, apparently, it is. It seems that they’re more interested in farm payments to the dead than to the needy living. It’s a wonder they haven’t bought a 19 Million Dollar Toilet to flush money down!

I’m rubber, you’re glue! “China Says US Food Has Its Own Problems”

China, the cause of 431 recalls in Canada alone since 2005, and the current poster child for bad quality in the public media, is starting their own smear campaign, citing cases of contaminated local food in the U.S. domestic market and flawed exports of pork and poultry, which had to be banned from distribution. I guess when it comes to pig, they’re just chicken!

Auction – Part III:

A California town that was the first town ever sold via auction on ebay, is

up for sale once again (for the 3rd time). The last buyer… ummmm…

killed himself.

The great thing about a free market is that you can buy anything … even your own town – complete with your very own troubled spirit! What more could you ask for!

I know I don’t mention this enough, but Tony Poshek, the newest member of the Aptium Global team, is available to handle all of your sourcing needs – even your unusual ones! Tony, the inventor of The Puddy Principle to Strategic Sourcing, has single-handedly sourced over 2B in the last decade and saved 15%, on average. With that resume, how can you go wrong?

Another Public Nomination

Astute readers will have noticed a comment yesterday by one Ron Holland of FreedomFest News, regarding the creation of the Free Market Hall of Fame where members of the Freedom Movement (not clearly defined or referenced on the site) will have the opportunity to initially vote on individuals contributing most to the success and advancement of free markets and free people around the globe during 2007. My first instinct was to delete it, since even if it wasn’t spam, it was obviously some sort of non-approved advertising, and more than likely in violation of at least one of the Sourcing Innovation Blog Comment Rules, and Rule #1 in particular (since it did not seem to have anything to do with the post).

However, I decided to check it out since I really couldn’t see too much harm leaving it as long as it did not put forth the views of any particular government party or political association. And although I’m still not entirely sure what it is, I am a bit intrigued. I’m particularly intrigued by the fact that write-ins are permitted and “journalists and writers” is a category. After all, I think the supply and spend management space needs all the attention it can get, and a few bloggers in particular definitely need more attention.

So it got me thinking. Specifically, it got me thinking that maybe if not a lot of people vote and maybe if a lot of sourcing and procurement professionals vote (for the same write-in candidate), maybe one of our own can get an honorable mention. (After all, you know Stephen Colbert is going to win once the Colbert Nation picks up on this, assuming it hasn’t already.) And that would make a great story.

So, even though he’d probably tell you it’s likely a big waste of time, if you have 30 seconds, please go to the Free Market Hall of Fame Survey, write-in Jason Busch for Question 1, and enter a valid e-mail address and zip code for question 2 and submit.

Then, if you have another 30 seconds, as the comment instructed, please e-mail and nominate Jason Busch for a Free-Market Hall of Fame Position under the “journalist and writer” category. To aid you, I’ve created a short nomination that you can cut and paste.

For the last two years, Jason Busch, a pre-eminant thinker in the supply and spend management space and author of the Spend Matters blog, has been diligently blogging multiple times a day on issues, events, best practices, and thought leadership in an effort to raise not only the profile of the space, but to inform each of his readers - peers, consultants, vendors, and general practices alike - of it's, and their, potential.

As one of the first practitioner's to realize that procurement is undergoing a transformation into a strategic supply and spend management function that will cross all boundaries and borders of the business, Jason's thinking is second to none. He was also one of the first to realize that forward thinking organizations not only need to consider long term price hedging contacts to insure supply and spend stability but also need to consider securing, and securitizing, raw production capacity, which they can then trade on a new type of open market if they secure more, or less, than what they need. (For example, see his great post "Sourcing Innovation: Securitizing Direct Materials" on August 28, 2006.)

He is a firm believer in free markets who strives hard to get the message across that as procurement evolves into the most strategic supply chain function, so does it's position and recognition within a corporation. Considering that good sourcing and procurement can save an average billion dollar company tens of millions while bad sourcing and procurement can cost them tens of millions, or more, it's important to have such a forward thinking journalist embrace the web, the new medium for content delivery, and blog almost religiously in an effort to simply open the minds and increase the understanding of others. And in this regard alone, he is a thought leader of the Free Market Movement and deserves to be recognized as such.

He may not win, but if the Colbert Nation can convince Google that Stephen Colbert is the Greatest Living American by overloading the system, maybe we can do the same and finally get this sector a little limelight!