Monthly Archives: February 2008

Musings on Talent Management

Today I’d like to welcome Dick Locke from Global Procurement Group.

Thank you to the doctor for the opportunity to contribute. Here are my thoughts from the perspective of someone involved in the training aspects of globalizing supply management.

I’m optimistic overall. The caliber of people attending my seminars has improved, and the caliber of commentary on supply management issues has gone up. In my field, the nadir was reached in approximately the year 2000 when ISM removed all international content from their C.P.M. exam. The reason? Very few of the companies that participated in ISM surveys sourced internationally. (That included their retail participants, believe it or not.) Since then, ISM essentially reinvented itself and scrapped not only their own Board of Directors but also the whole C.P.M. program. Their new certification is intended to have strong international content.

The reasons that we are seeing better talent, in my view, is that there is

  1. a significantly better recognition of the strategic nature of sourcing and supply chain management and
  2. a better division of those strategic functions from the tactical aspects of procurement.

Sourcing and supply chain management are complex and challenging. Sourcing in a global environment requires skills in analysis, human relationships, laws, regulations, economics and a great deal of flexibility. Complexity and multi-faceted challenges attract talented people as long as the tasks they tackle are achievable.

In the computer industry, we realized sourcing remains a core competency even when manufacturing isn’t. All the computer companies use the same small group of component suppliers and subcontract manufacturers. To differentiate the cost or flexibility of manufacturing products, the computer companies have to be able to negotiate better deals than either their competitors or the subcontract assemblers can.

Now, a couple of caveats.

One is that talent is one thing, knowledge is another. In the United States, Japan, and a few other countries, imports and exports are a low percent (around 18-20%) of the country’s GDP. People can come away from training programs or even university degrees with very little global knowledge. I have a 10-question quiz on international skills on my website. About 4 people per day take the test. Up to a few years ago, people typically got one or two questions right. Now they are typically getting four or five right. While both talent and knowledge are increasing, don’t assume even the most talented professional will know about foreign exchange risk management, for example.

The second is that it’s easy to drive talent away. Talented people don’t tolerate bureaucracy and routine very well. I can think of three types of bureaucracy that need to be contained.

One is just plain rules and regulations. I know of one ex-client with a good reputation whose people couldn’t carry on a substantive conversation on procurement issues for more than a few minutes without reference to their book of rules. Back when I worked at HP, I inherited a department who believed they had to ask companies such as Texas Instruments once per year if they were a small business or not. When suppliers see that kind of silliness, it diminishes the buying company. When talented people see that kind of demand on them, they vote with their feet and walk away.

Another is giving too much power to departments such as legal and finance. As a consultant, I’ve received 30 page contract proposals with a quarter page of statement of work in them. It takes a mighty big potential level of business for me to spend any time on those proposals. If you have a standard purchase contract, it’s reasonable for a legal department to control maybe five or ten percent of it. The rest is pure business issues that your professionals should be able to (and expected to) control. Lawyers are wonderful people but there’s an old saying that “when your only tool is a hammer, every problem looks like a nail”.

I’ve also seen finance departments unilaterally decide to pay suppliers late. Successful heads of procurement must be able to claim and maintain their department’s role as the manager of the relationships.

Finally, I’m a bit concerned about “technological bureaucracy”. Hard-to-operate software can become all-consuming or can result in the technical wizards being given all the recognition. And the idea that all interfaces (such as e-RFX) can be automated can eliminate the human aspect of procurement. That aspect of procurement is vital for business relationships in most of the world. The challenges of doing this will also attract talented people.

So, for obtaining and maintaining talent effectively, here are a few guidelines.

  • Create jobs that talented people will want.
    Don’t try to put talented people into bureaucratic situations.
  • Separate the tactical and strategic functions.
    Tactical problems will too often take priority over stragegic issues. Not only will your strategies not advance, your most talented people will leave.
  • Train your people.
    Talent and knowledge are two separate issues.
  • Fight fiercely against practices that can drive talented people out.

Retaining Talent in a Fast Growing Market

A couple of months ago, Knowledge @ Wharton China ran an article on how to retain talent in a fast-growing market like China that the doctor couldn’t resist skimming. It notes that protecting your workforce from competitors eager to recruit experienced staff is a challenge in fast-growing markets as well as stable markets (which makes sense, since a developing market is even more likely to need talent). It backed this up with a scary statistic – the financial services industry had employee turnover of 25% in Asia in 2005, and indications are that the turnover rate has been steadily growing since. It was even worse in sales and manufacturing where turnover rates of 40% are common!

According to the article, it takes more than a competitive salary to retain staff. This is obvious – anyone who wants talent is going to at least pay a competitive salary, and if they’re desperate enough, they’re going to be offering pay that is at least at the high end of market average. The article noted that pay does play a role, with predicted salary increases of 7.9% for administrative workers and 8.9% for senior management in China in 2007, as compared to a real average increase in the US of 1.4%, but insists that more pay isn’t enough on its own to retain talent.

One of the suggestions it makes, which was employed by Spansion China who’s turnover rate is half of what it is for the electronics industry as a whole, is to not only identify your employees as your core assets, but to take actions that demonstrate you mean it. Spansion accomplishes this by holding regular meetings, discussions, and gatherings where employees are encouraged to give their feedback, positive or negative.

Another suggestion is that you should, to borrow a western phrase, empower your people – and mean it. When Vanke groups hires someone for a job, the new hire is given what he or she needs to do the job and is free to make his or her own decision on what’s best for the company – and then act on that decision. Plus, it gives its employees a clear career path and free training programs. Those employees who work hard have lots of opportunity for advancement within the company.

The article also noted that, in the best companies, employees tend to have a clear understanding of organizational goals, that in the best companies, there are aggressive goals at all levels of the organization and that the best companies reward employees appropriately.

In other words, there was nothing fundamentally new in the article, but they were all points that deserve repeating.

Don’t Forget About the (Sourcing Innovation) Resource Site!

That’s right! the doctor also maintains a resource site (indexed as the first link on the right-hand sidebar) which, as far as he can tell, has more blogs, publications, societies, companies, and events indexed than any other site in the space! For example, there are currently over 100 events indexed for 2008 (yes, you read that right, over 100 events for 2008) – which is at least twice the number of events listed on the largest event calendar for the sourcing and procurement space that the doctor was able to find.

If you have never checked it out, or haven’t checked it out recently, the doctor strongly encourages you to do so. It’s nothing fancy, but it doesn’t have to be. It’s designed to be a starting point that you can use to find out what publications, societies, events, and other resources are out there to help you on your quest to become a better sourcer, or, if you will, sourcerer of your trade!

Also, the doctor asks that if you work at a supply chain company not on the list, are a member of a relevant supply chain organization not on the list, know of any open conferences or forums not on the list*, or are aware of any new publications that are relevant to the profession that are not on the list, that you send them along to him at the doctor <at> sourcinginnovation <dot> com so that he can add them during the next site update, as this will make the resource site better for everyone. (Regular updates take place every week to two weeks, so please allow time for your contributions to appear before resending them.)

In addition, if you could be sure to include the following information with each future site addition, it will greatly reduce the effort required and help get your contribution posted in a timely manner:

Contribution Type Information Requirements
Blog Name
URL
Author
Primary Focus
Company or Analyst Firm Name
Website URL
Brief Description
Event Date
Name
URL
Location
Sponsor(s)
Sponsor URL(s)
Job Site Name
URL
Publication or Journal Name
URL
Society Name
URL
Vendor Library Vendor Name
Library URL

To Your Future!

* Please limit contributions to conferences and forums, and not seminars, workshops, or training classes. the doctor is not implying that they’re not important, but as there are far too many seminars, workshops, and training classes offered by hundreds of consulting and training firms to index in a meaningful fashion on the current resource site, the doctor is sticking with conferences and forums for now. (Note that annual vendor user conferences are okay.) Thank you.

IQ-based Navigation of Contingent Labour Sourcing

One of the subjects that is important to discuss from time to time on a sourcing blog is the subject of services sourcing. I’ve discussed the subject of Strategic Service Management a few times on this blog, along with the service management capabilities of Servigistics and Provade, but I’ve never dived into the subject of contingent labor force sourcing.

Although it may not be as universally applicable as the sourcing of marketing, print, and legal services, which every company needs, if you’re a call center, drop shipper, retailer, or seasonal manufacturer, for example, contingent labor services can be a very significant part of your budget. Furthermore, if left unchecked, these costs can not only soar out of control, but lead to significant losses through uncaught over-billing (and by the time you caught them in a properly executed spend-analysis project, it could be too late to get a refund if you’ve switched vendors).

That’s why, if you fall into one these categories, you really should have a good labor sourcing and management solution. One such solution that I would consider is the one offered by IQ Navigator.  I recently had a chance to walk through and discuss their SaaS-based services management solution in length, and while, like a few other offerings, it is flexible enough to handle multiple services category, it is particularly well suited to contingent labour force sourcing and management.

Contingent labor is a complex category. Sometimes you’re hiring by the hour, sometimes by the day, and sometimes by the week. Sometimes you’re hiring one person for a job, sometimes twenty. Each position has a different job description, and different requirements. And, each HR person usually has hundreds of jobs across dozens of positions across multiple locations to fill simultaneously in your typical multi-national. Furthermore, multiple documentation requirements, including resumes, need to be maintained for each potential resource.

IQ Navigator’s solution not only allows each job requisition to be customized by type, requirements, and process flow, but it supports the entire process from job definition, advertisement distribution to staffing agencies, resource resume review, resource selection, time and rate approval, project tracking, billing, matching against approved rates, and alerts if a resource comes close to their approved hours. It also supports job type templates, project and process templates, and calendar based definition of resource requirements. This last capability is well thought out and rather unique – it allows a supervisor to load up a single monthly-calendar based screen, and, for each job, specify how many resources are needed for each shift in that month. All the supervisor has to do is enter numbers – and the system enables the HR manager to take care of the rest – automating the distribution of the advertisement to staffing agencies, the collection of resumes, and the matching of experience and certifications against job requirements.

IQ Navigator’s product is also quite configurable. It supports the definition of projects with multiple statements of work (SOW), where each SOW has multiple deliverables, and every SOW can have different terms and rates, tied to a contract, which can be incorporated as a key field or as an attachment. It also allows mass approvals, which can be done by e-mail or mobile device by a busy manager in the field.

And it works. IQ Navigator has over 50 clients, including a couple dozen Global Fortune 500s, processes over 50,000 thousand contractors weekly, from over 4,700 staffing agencies in over 15 countries which represent over 3 Billion in spend under contract annually. Furthermore, over one quarter of spending by its global multi-national clients is outside of the US.

What Will Be The Top 10 Supply Chain Stories of 2008? Part V

In part I, we reviewed Supply Chain Digest’s 2007 Supply Chain Year in Review article, where they picked their top ten news stories for 2007. In Part II we reviewed Supply Chain Digest’s Key Trends Impacting Supply Chain Management and Logistics for 2008, as identified by the nine executives and academics they asked to postulate what 2008 has in hold. In Part III we speculated what the top 10 supply chain related stories in 2008 could be, if the right chain of events occurred. Yesterday, in Part IV we dove into what the first five supply chain related stories of 2008 could be, why they could happen, and what you could do to make sure they do, or do not, happen to you (as the case may be).

In today’s post, we’re going to dive into the last five stories that we postulated and carry the exercise to its logical conclusion. As we mentioned yesterday, the whole point of an exercise that attempts to predict what might happen is to figure out what bad things could happen, how they might come about, and what we can do to prevent them.

US Exports in Manufacturing Rise Rapidly

“The low dollar, coupled with the introduction of new, more efficient technology and leaner practices makes the US the low-cost country of choice for Western Europe.”

The dollar is low, US quality is high, and the only reason the US isn’t the destination of choice is the fact that even with a weak dollar, unionized labour costs in the US are still high. However, high labour costs can be counteracted with more efficient production, which reduces the overall cost per unit. If a number of upstart manufacturers were to introduce new technological innovations that were significantly more efficient than the process and technologies typically used in low-cost countries today, then this decrease in production costs coupled with high quality (mandated by stringent US regulations and the constant threat of a class-action lawsuit should quality be sub-standard) could cause demand for US exports to sky-rocket.

This would be a bit of a double-edged sword for manufacturers. Those manufacturers with the new technology would stand to benefit greatly, while those without could go out of business if the dollar stays low and a recession hits as demand would quickly shift to the more efficient, and more cost-effective, manufacturers.

The ounce of prevention here is to continue to improve your processes, technology, and innovate whenever you can.

Port Congestion Re-Appears as a Result of a Natural Disaster on the West Coast

“The Ports of Long Beach and Los Angeles are almost destroyed by a tsunami caused by a major earthquake off of the coast of California.”

If the Juan de Fuca plate slips against the Pacific plate, a massive earthquake could occur off of the California coastline. This could produce a massive Tsunami that smashes the California Coast and wipes out the ports of Long Beach and Los Angeles, which were the fifth and fourteenth busiest ports in the US in 2004 with a collective 5% of total trade volume. If the ports continue to operate near capacity, losing 5%+ of ocean-freight capacity would be a serious blow to your supply chain.

The ounce of prevention here is to minimize your need for Ocean Freight – by buying locally or near-sourcing from Canada, Mexico, or South America – and to have back up plans to air-freight any key products and components that you have to buy overseas.

Agflation Continues to Rise

“Politicians give in to the AlGorites’ demands and mandate the production of more bio-fuels, despite their inefficiencies. Coupled with reduced crop production due to the massive heat-wave, this causes the prices for many basic food crops to increase by 30% or more.”

Today, bio-fuel is usually associated with ethanol, and corn-based ethanol in particular. However, production of corn-based ethanol is not an efficient or cost-effective process. It currently takes as many as seven gallons of oil to produce eight gallons of ethanol, which is not as fuel efficient as unleaded gasoline. Translated, we’re sacrificing needed food crops for an increase in fuel of a mere 10%! Considering that we’re now experiencing shortages in staples like hops because farmers are planting more corn to try to cash in on the bio-fuel rage, it’s hardly worth it.

The ounce of prevention is to plan now for reduced crops from farmland that can also be used to yield corn – which includes soybeans, wheat, oats, and barley – and higher prices for corn, and related food staples. Start working now on alternate recipes that use less of these foods and more of substitutions.

Services Outsourcing Rises

“In an effort to contain costs, companies start outsourcing services, particularly in contingent labor management.”

If not managed effectively, contingent labor can be very costly for any company that employs a large number of contingent workers on a regular basis. Hourly rates can be higher than the median, workers can be retained longer than necessary on a project, fraudulent billings by less-than-honest staffing agencies can go uncaught, and if workers are retained too long, they are considered part-time employees, and dismissal can result in heavy penalties.

Since cost management will be crucial in the coming months, effective contingent labor force management will become critical for certain groups of companies. Those companies who migrate successfully will gain a great advantage over their peers. Those that don’t could be at a severe disadvantage and have trouble competing against their peers.

The ounce of prevention here is for those companies with large contingent labor forces to put processes in place that will allow them to either outsource their contingent labor management to a third party that can do it better, or to manage it more efficiently with an on-demand SaaS application, as soon as possible.

Major Multi-National X Moves it’s Headquarters to China

“Betting that China is the next global economic powerhouse, X moves its headquarters from the good old U. S. of A. to China.”

Stop laughing. It could happen. Many foreign companies fled the US stock exchange with the introduction of Sarbanes Oxley, and that was just a paperwork act. Now we are in an economic slowdown, with a weak dollar, and a Chinese powerhouse on the horizon. IBM already moved their supply chain operations to China. It’s probably only a matter of time before a global multinational in the Fortune 500 moves its headquarters to China.

What will this mean? Hard to say. That company will have a significant advantage in the growing Chinese marketplace, as well as in the neighboring Indian marketplace, an economy expected to have a middle class population of over 583 million by 2025. That company will have a significant advantage in taking advantage of the most efficient production that China has to offer. But will it be enough to out-distance the competition? I don’t know. However, I do know that it’s something you should start thinking about today!