Monthly Archives: August 2007

Good advice for CIOs, Good advice for CPOs

A few months ago, Baseline Magazine ran an article called Ditch Your Blackberry, which chronicled an interview with personal productivity guru David Allen, and which contained good advice beyond that imparted in the title.

According to Allen, personal technology IT helps people connect, but it often adds more stress than it alleviates. Yes its true that without technology, your productivity would likely crash and burn, but technology is a double edged sword. If you are unproductive to begin with, technology will just be something else you use unproductively.

Technology keeps you down in the weeds all day, often keeping you from seeing the big picture. The larger perspective. It’s important not to lose sight of what you are trying to accomplish and what people need to be involved in a conversation. And when it comes to productivity, it’s important not to forget the human equation. What does “done” mean? What does “doing” look like? Where does it happen? And who is doing it? The biggest challenge is usually to define your work. Technology can’t do that. It can only help you do your work once it’s defined.

Furthermore, technology cannot take into consideration all the subtleties of collaboration. The biggest issue with collaboration technology is that people tend to make it overly complex, thinking it’s going to make work simpler, but the truth is, you have to make technology as simple as possible with as few moving parts as you can get by with, in order to leave lots of room for flexibility as things change.

In other words:

  • You need good processes. Technology will not fix a bad process.
  • Don’t lose sight of your goals when using technology.
    It’s there to serve you, not the other way around.
  • Success depends on collaboration, and, although technology can enable collaboration, it does not create it.

Green Purchasing Reports

In advance of the upcoming Green Purchasing Summit in November in Miami, Florida, EyeForProcurement has released their Green Purchasing Report that summarizes the results of the Green Purchasing Survey they conducted in June – July 2007.

The survey, which polled 188 procurement professionals primarily across North America, Europe, and Asia across the automative, electronics, chemicals, apparel, and transportation sectors among others, found that while eco-friendly purchasing is a growing trend, few companies are realizing any spin-off benefits in terms of reduced costs. Furthermore, the cost of implementing environmentally friendly purchasing is seen as one of the primary barriers to adoption.

The report found that only 31% of respondents have policies and are actively practicing. An additional 21% have written policies on green purchasing but are not actively practicing green purchasing but an astounding 48% still do not even have green purchasing policies in place. For those that are actively practicing, or at least have established policies, 46% noted that the key driver was a larger corporate responsibility program. Other drivers were customer satisfaction and following the industry trend, at 13% each.

The key benefits that were cited were support of corporate environmental sustainability, strategy, and vision at 67%, responding to customer interest in eco-friendly products and practices at 49%, and reduced accident risk, liability, and health and safety costs at 19%. In contrast the major obstacles to implementation are costs for 43% of respondents, suppliers’ lack of environmental awareness for 42% of respondents, and insufficient green purchasing knowledge for 37% of respondents. The good news is that 98% of respondents believe that the practice of green purchasing will continue to expand. This indicates that the obstacles will eventually be overcome.

For those of you thinking of attending the EyeForProcurement Green Purchasing Summit in November in Miami, Florida, please note that EyeForProcurement is offering a 20% discount for all delegates who register and quote “Sourcing Innovation“.

In addition, in advance of the upcoming Green Transportation and Logistics Summit in San Francisco, California, EyeForTransport has released their Green Transportation and Logistics Report that summarizes the results of the Green Transportation and Logistics Survey they conducted in June-July 2007.

The survey, which polled 271 transportation and logistics professionals found that while some still view supply chain greening as a necessary evil, the most innovative and successful companies have discovered the business case for going green. It also found that 79% of companies believe supply chain greening is at least fairly important and that 69% believe that green issues will become more important over the next three years. Unfortunately, for the majority of respondents (66%), green initiatives are not yet seeing improved supply chain efficiency, but since a reasonable minority (27%) are experiencing more efficiency, this should improve as time goes on. Furthermore, 36% of respondents expect to see a financial ROI within the next three years while 74% expect to see a public relations payback.

The survey also reviewed some of the general transport and logistics initiatives being undertaken by respondents to green their supply chain. These initiatives include emissions measuring and/or reductions, energy efficiency improvements, switching to alternative fuels, reducing air transport, strategic warehouse and DC placement, vendor re-routing to reduce miles travelled, and the use of more environmentally friendly logistics provider. Some of the more specific initiatives being reported by respondents include product design and packing improvements, recycling programs, sustainable buildings, waste reduction & asset recovery, and reductions in toxins and hazardous chemicals.

The Creative Challenge II (Marketing and Procurement)

Yesterday we discussed the key challenges that need to be overcome in order for marketing and procurement to effectively work together, as well as a classification of “Above The Line” (ATL) and “Below The Line” (BTL) marketing spend, as discussed in the recent efficio report The Creative Challenge: Driving Efficiencies in Marketing Procurement. This report, which has highlighted on Spend Matters soon after it was released, is a nice companion to the Magic and Logic: Redefining Sustainable Business Practices for Agencies, Marketing, and Procurement research report co-sponsored by CIPS (Chartered Institute of Purchasing and Supply), the IPA (Institute of Practitioners in Advertising), and the ISBA (Incorporated Society of British Advertisers) last summer, that I summarized in a 2-part blog post last fall (Part I and Part II).

Today we are going to discuss the 8-step Efficio approach to driving efficiencies in Marketing Procurement, but first we are going to review the addressability of each subcategory and some typical savings levers that a procurement professional can apply to gain savings in each of the categories and sub-categories of marketing spend, since these aspects of the report are quite useful.

The report classifies the addressability of each subcategory so that you can stagger your initiatives in waves, and start by addressing the categories where you are likely to obtain the quickest hits and bolster momentum for future efforts.

According to the report, the easiest subcategories to address are media space buying, free-standing inserts, media planning, and pre-press “above the line” and promotions, pre-press, printing services, and branded merchandise “below the line”. After this, it suggest tackling direct marketing – data management and campaign fulfillment, market research, public/consumer relations, sponsorships, and meetings, incentives, conferences, and events below the line, which are usually of moderate complexity. Finally, as you work your way from the subcategories that can be addressed using mostly tactical initiatives to those that require a lot of strategic planning and cooperation, you would end with the creative agency and broadcast commercial production spend “above the line” and the design agency spend “below the line”.

The typical savings levers that a procurement professional can apply to gain savings, which, depending on the lever can demonstrate savings anywhere from 3% to 50%, are:

  • Consolidation with one media buying agency & fee compensation schemes
  • Develop a cost model and consolidate buys with preferred media
  • Prioritize services, change the remuneration model, and align resources to secure the best talent
  • Change the fee calculation and include the cost model as a negotiation input
  • Pre-select strategic partners and consider production companies’ business models
  • Analyze vendor capabilities and streamline processes to better specify requirements
  • Change the fee model and build it into negotiations
  • Change from cost-per-project to core-team retention and link compensation to results
  • Consolidate from agency management to direct supplier management and improve demand management
  • Consolidate demand and channel to preferred vendors
  • Conduct a structured benchmark of proposed rates, and closely manage time utilization
  • Conduct competitive bidding to select preferred vendors
  • Prioritize and streamline event sponsorship, review contracts, and closely monitor contract compliance
  • Analyze pre-press vendor capabilities and streamline internal processes to better specific requirements
  • Standardize and rationalize print specifications and select vendors based on capability match
  • Standardize range of merchandize and consolidate spend
  • Review and prioritize budgets and implement processes to increase compliance

The 8-step Efficio approach to driving efficiencies in Marketing Procurement is summarized as follows:

  • Objectives
    Determine the project scope and objectives and agree on the team, roles, and responsibilities.
  • Category Profile
    Do a spend analysis on marketing spend, understand current contracts and drivers of variety and complexity, and future requirements.
  • Market Profile
    Understand key market dynamics by market sub-category, understand scope of service offering and positioning of current supply base, and screen the market for potential alternative agencies.
  • (Sub-)Category Strategy Development
    Assess key demand issues and trade-offs and develop a procurement strategy per marketing category.
  • RFP Process and Pitch
    Use a multi-step RFP process where you compile a list of agencies, conduct initial “chemistry meetings”, and invite short-listed vendors to RFQ response submission.
  • Contract Negotiations
    Analyze the RFQ responses, prepare and conduct negotiations with selected agencies/suppliers to submit a final bid, and finalize an agreement.
  • Savings Capture and Compliance
    Institute policy, process, tools, and organization changes to mitigate savings leakage, track savings, and develop a transition plan to change mentality and habits.
  • Supplier Relationship Management
    Hand-in-hand with savings capture and compliance, institute policies, processes, tools, and organizational changes to maintain productive relationships.

The report also contains a Case Study on a Digital Agency Strategy, a Case Study on Market Research, and a Case Study on Printed Marketing Materials that are worth your time as well.

The Creative Challenge I (Marketing and Procurement)

As pointed out by Jason Busch over on Spend Matters, efficio recently released a white paper entitled The Creative Challenge: Driving Efficiencies in Marketing Procurement that focuses on how procurement can target marketing spend. Since I wondered how it compared to the Magic and Logic: Redefining Sustainable Business Practices for Agencies, Marketing, and Procurement research report co-sponsored by CIPS (Chartered Institute of Purchasing and Supply), the IPA (Institute of Practitioners in Advertising), and the ISBA (Incorporated Society of British Advertisers) last summer, I decided to give it a read and summarize it in a 2-part blog post so that you, dear reader, could do a high-level comparison for yourself by referencing the posts I did on the latter last fall (Part I and Part II).

The report presents some of the major challenges to the initiation of rewarding discussion and collaboration between marketing and procurement, a taxonomy through which marketing spend can be understood, and the outline of an approach to driving efficiencies in marketing procurement. This post will review each section.

The key challenges addressed are the following:

  • Understanding that Close Relationships are Good for Both Sides
    Marketing often believes procurement is not interested in learning about their market or relationships while procurement often believes that marketing does not want them to be involved in relationships with them or their agencies.
    However, a productive understanding can be reached if procurement takes the time to learn the marketing business and both sides agree on clear roles and responsibilities.
  • Realizing that It’s Not Just About Cutting Costs
    Marketing often believes that procurement is only interested in cost-reductions at the expense of the client-supplier relationship while procurement often believes that marketing has a “money is no object” viewpoint that is exploited by suppliers.
    However, a productive understanding can be reached if procurement takes the time to position themselves as a growth enabler, educating marketing about the total supply chain approach, and focus on the value they can bring.
  • Acceptance that Good Procurement Does Not Stifle Creativity
    Marketing often believes that procurement only knows how to apply a rigid process while procurement often believes that marketing departments are unable to follow processes.
    However, a productive understanding can be reached if procurement develops a structured commercial approach tailored to marketing and a joint agreement is made on objectives and key performance measures.
  • Understanding Properly Structured Relationships are Effective
    Marketing often believes that procurement is only interested in tendering and tactical savings while procurement often believes that marketing’s relationships with their suppliers are too cozy and that suppliers take advantage of this.
    However, a productive understanding can be reached if procurement takes the time to demonstrate their value add.

The taxonomy breaks marketing spend down into categories and sub-categories according to “Above the Line” (ATL) and “Below the Line” (BTL) spend. ATL generally refers to all activity related to advertising and all other marketing activity, which is generally undertaken to support the messages created in ATL, generally falls into the BTL category.

“Above the Line” spend includes media space acquisition (divided into media space buying, free-standing inserts, and media planning) and campaign production (divided into creative agency spend, broadcast commercial production, and pre-press) while “Below The Line” spend includes other marketing services (design agencies, direct marketing data management, direct marketing campaign fulfillment, market research, promotions, public/consumer relations, and sponsorships), printed marketing materials (divided into pre-press and printing services), branded merchandise, and meetings, incentives, conferences, and events.

The lion’s share of the marketing budget in most companies is directed towards “above the line” activities and usually towards media space acquisition through agencies in particular. Furthermore, even though the markets often lack transparency when it comes to costs, since markets range from strongly regulated markets to highly negotiable markets (in Europe alone), there is a significant opportunity for a company with a large budget, especially when distributed across several markets, to achieve savings through a structured approach to selecting, managing, and giving incentives to its media buying agencies without impacting the quality or creativity of individual campaigns.

Tomorrow we’ll review the efficio approach to driving efficiencies in marketing procurement as well as some of the typical savings levers that a procurement professional can apply to gain savings in each of the categories and sub-categories of marketing spend.

Roll On! (and Keep Those Logistics Wheels Turning)

Roll on highway, roll on along
Roll on daddy till you get back home
Roll on family, roll on crew
Roll on momma like I asked you to do
And roll on eighteen-wheeler, roll on (roll on)
  Alabama, Roll On

Whether or not you like country music (as a general rule, the doctor does not), and whether or not you remember the hey-day of Alabama (where they were not confined to the country music stations, but plastered over music adverts on TV as well), without some proper planning, you too could be singing this refrain over and over if your logistics comes to a screeching halt because there’s no one to drive the truck, no fuel to gas it up, or worse yet, no truck at all – and you are unable to get your goods from the warehouse to the retailers where your customers are waiting.

The sky may not be falling, but without proper planning, given the shortage of truck drivers in North America (which is expected to skyrocket over the next five years since the number of new drivers isn’t even keeping up with demand in most places and some projections have up to 100,000 drivers retiring in the next five years in North America), constantly rising fuel prices, and increasing thefts of expensive automobile – and truck – parts (with a restricted supply) with surging scrap metal prices, without good planning, you could soon find yourself in a situation where it might as well be.

That’s why I was pleased to see AMR tackle the issue in one of their free research pieces a while back – Eight Ways to Keep the Supply Chain Logistics Wheels Turning even if I think it did miss a couple of tips. (It was updated with Nine Ways To Keep the Supply Chain Logistics Wheels Turning about a week later which was no longer free to non-subscribers.)

In the piece, Lora Cecere notes that, as per the Council of Supply Chain Management’s (CSCMP) 17th Annual Report on the Sate of U.S. Logistics, logistics costs rose 15.2% in 2005 to $1.2B, an 8.8% to 9.5% year-over-year leap beyond the nominal gross domestic product (GDP). Furthermore, total logistics costs – transportation, inventory carrying costs, and order administration – have risen more than 50% in the past decade. Thus, you should be taking whatever actions you can to help manage, offset, or absorb the costs. The recommendations provided were the following:

  • Plan Now for Tighter Capacity
    The American Trucking Association (ATA) estimates that the driver shortage will grow to 111,000 by 2014.
  • Manage Fuel as Part of Your Risk Management Strategies
    In 2005, the trucking industry spent $87.7B for diesel fuel, a year-over-year increase of $12B. The ATA forecasts diesel fuel costs will rise to $19B by the end of 2007.
  • Have the Right Supply Chain Planning (SCP) Master Data
    Lead times, transportation costs by lane, loading times, unloading times, and related data are all critical for transportation network optimization.
  • Rethink Customer-PickUp (CPU) Programs
    Customer PickUp programs are improving efficiency by use of drop trailers and scorecards.
  • Diversify Entry Ports
    Many U.S. ports are more than half a century old and showing signs of neglect or obsolescence. The World Shipping Council estimates that more than 800 ocean freight vessels make more than 22,000 calls at U.S. ports every year, which is 60 vessels a day at the nation’s 145 ports. With growth rates of over 10% projected for the next several years, investment for growth is inadequate.
  • Face Reality – Redesign Your Network
    Only 7% of companies analyze their logistics networks more frequently than annually, with 67% evaluating their networks annually and 36% redesigning every two years or more.
  • Get Help From a Good Partner
    Preferably a consulting partner with deep expertise and logistics benchmarking knowledge.
  • Make U.S. Transportation Infrastructure an Item on the National Agenda
    In 2006, the American Society of Civil Engineers gave the nation’s freight transportation system a dismal D+ on its infrastructure report card.

To this, I would add:

  • Use Decision Optimization
    Transportation Network Optimization is not something you can accomplish by hand with a spreadsheet. Make sure you have a good tool that can capture all of the costs and complexity and give you an optimal design for your current situation.
  • Don’t Forget Security
    In addition to the slew of security regulations you have to adhere to these days, especially if you are importing or exporting, depending on the goods you are carrying, both the truck and its content could be more valuable to your average thief than you might think. Make sure there is good security in place everywhere the truck is to be loaded, unloaded, or left unattended for any period of time and that the locks are recent, theft-resistant, and in working order.
  • Invest in Visibility
    Consider networked RFID technology to insure the system is immediately notified anytime something enters or leaves the truck and radio-frequency LoJack tracking technology to make sure you know where the truck is at all times.