Monthly Archives: March 2008

Conference Fever

It’s that time of year again where everyone gets conference fever – and the time of year where I recluse myself in the dark corners of my basement in the hopes that I can again avoid the annual malady that infects so many of us. But alas, although I’ve managed to escape the worst strains yet again, I’ve still been inflicted with a minor strain.

Thus, even though I don’t have the crazy schedule of some of my fellow bloggers (like Jason Busch), I will be at a few conferences this spring. So far, I’m committed to two in the space and one not. And in this post, I’m going to plug the two in the space that I am committed to since I think they’ll be worth your while.

The first conference I am confirmed to attend is SCL’s Creating a Resilient Supply Chain, which is taking place May 5 and 6 in Toronto, Ontario, Canada at the Paramount Conference and Event Venue. Now, I’m sure a lot of you, and particularly those of you south of the 49th parallel, are probably saying “who, what, where“, so I’m going to answer your questions. SCL is the Supply Chain & Logistics Association Canada, one of our organizations that would be like your CSCMP, just like our PMAC (Purchasing Management Association of Canada) is like your ISM. (Remember, although the doctor spends a lot of time in, and working with, the US, even though he has lived in the US, he does maintain his permanent residence north of the 49th parallel.) The what is SCLs big annual conference, and the where is in one of our conference capitals, quite close to Pearson International Airport.

There are some good professional and corporate names at this event. Matt Gersper of Global Data Mining, who’s contributed to this blog in the past; Sankar Krishnan, a Senior VP of Citibank; Bob Dye, the President of PMAC; Ginnie Vensiovaltis, Transportation Services Manager of Unilever Canada; Ryan Persad, Purolator Global Supply Chain Services; Jim Topkins, CEO of Tompkins Associates; Warren Sarafinchan, Transportation Director of Maple Leaf Foods; and Jayson Myers, the President of the Canadian Manufacturers & Exporters association.

The second conference I am confirmed to attend is Iasta’s reSource, which is taking place May 12 through May 14 in Indianapolis, Indiana, at the Marriott Downtown. Although this is, primarily, a customer-focused conference, it is still one that you should be strongly considering if you are a customer or considering becoming a customer. Although it’s a relatively new conference (as it’s only in its second year), Iasta did a great job pulling this together last year and managed to create an event that was both useful as a training event (the first day) and a general conference on good e-Sourcing, supply, and spend management best practices, mixing customer presentations with keynotes from thought leaders. (Jason Busch of Spend Matters gave the main keynote last year.) Plus, and you race fans will love this, they host their main networking event at the Indianapolis Motor Speedway. (And it looks like they’ve added a second networking event at Victory Field as well this year.)

And for those of you dying to know what the third event outside of the space that I’m committed to attend is, it’s the IEEE Region 7 Canada Spring Board Meeting that takes place immediately before CCECE 2008. Aren’t you ever so glad that you asked?

I’m sure I’ll be busy in June as well … but that will have to wait for another post.

To All The Whiners …

For those of you who haven’t noticed, Jason Busch over on Spend Matters has found a new cause – Anti-Dumping Fever. (Much better than the China Fever he had last summer and fall.) And I have to agree with him this time … but what’s really peaked my attention is how fast the “no-trade” protectionists who want to transform America into the Soviet Union or China of times past when the iron and red curtains were drawn tightly shut have jumped on him like a hoard of hungry jackals on a wounded rabbit.

Take yesterday’s comment from an anonymous poster offering one opinion:

You offer up an interesting argument but it is only one side of the story. What about the jobs that Leggett and Platt provides to its workers? Will they be sent to China? Shouldn’t US workers have a right to a job in global economy. It is not their fault that their employer has made business mistakes. And what happens when there are no inner spring manufacturers left in the US? What will we sleep on? Trade is a tricky subject with multiple perspectives.

Wow! What an argument! Maybe the government should step up every time management in a company screws up and “protect the jobs of the workers”! Can’t produce parts cheap enough? No problem, anti-dumping. Granted mortgages you never should have granted in the first-place? No problem, bail-out. Stupidly hired more workers than you can afford? No problem, tax-break.

While we’re at it, why not start “socializing” all of the businesses! The government can be a part owner in everything. That way, at the first sign of trouble, it can start creating and enforcing new anti-dumping and anti-free trade laws instead of waiting until things get too bad. That way, no jobs get lost and no massive bail outs are needed.

Aw, heck! Why stop there? Why not repeal all the free trade acts introduced by past administrations – you know, the ones that catapulted America to times of unmatched economic glory and solidified its place as the leader of the free world. After all, in a free market, there are always losers as well as winners, and the losers will have to lay people off … and even though many of them will be instantly snatched up by the winners, there’s always a few that might be out of work for a while – and we all know that it’s the good of the few, or the one, that matters, and not the good of the many – so let’s make sure their jobs are protected for life! That way, even the lazy and incompetent, a small minority but a minority nonetheless, will never have to worry about their jobs again!

And yes, I’m being very sarcastic. I don’t know how else to describe how backward-thinking or narrow-minded these individuals are. If they have their way, America would be the next socialist/communist regime – and one only has to look at Venezuela and Zimbabwe for some recent examples of how devastating that can be … and for those with longer term memories, the former Soviet Union or China before they started opening the iron and red curtains. Where people stood in lines for days just to get basic food and household items because the economies were in a constant state of collapse.

And it’s not like the US economy isn’t in a bad enough state as it is. The dollar is already worth less than its northern neighbor on some days and is now worth roughly half of a British pound. Closing the borders and finding new and creative ways to block free trade is only going to make things worse.

So what if some jobs go away? In a global economy, new jobs are also created every day. And for first world leaders, these are usually better jobs. If you’re a qualified engineer … you’re in demand. No more inner-springs? Okay. Make springs for automotive assemblies. Those get outsourced too? No problem – design springs for next generation automobiles. Remember, outsourcing intellectual tasks is always exponentially harder than outsourcing grunt labor. And leadership is one thing that just can’t be outsourced.

Furthermore, isn’t the US supposed to be a leader in education and accessibility thereof? Can you not only retrain for another job but also retrain to be a world-class designer and leader versus just a rank-and-file doer and follower? Then, not only will you always have a job in the global economy (though not necessarily the same one you have tomorrow that you have today – and that’s the point!), but you will be a leader in the global economy – and possibly one that manages R&D teams around the world.

So what do you want? A continued rise to glory? Or do you want to oppress the country into a state that would make even the dark ages of olden times look good? It’s your choice, and I hope the majority of you, especially at the polls in November, choose wisely.

And to the whiner’s, I dedicate this poem:

To the whiners on Spend Matters
Who moan about free trade spatters
I wish they’d all stay home
I dedicate this poem
To the whiners on Spend Matters

To the whiners who always moan
So much that they would fill a tome
On issues big and small
Their moans don’t enthrall
Oh why should we throw them a bone

The winds of change are always blowing
And every time you try to stay
The winds of change continue blowing
And they’ll just carry you away

To the whiners so full of strife
Go suck it in, it’s free trade life
We don’t live in a dome
I dedicate this poem
To the whiners so full of strife

To the whiners so pitiful
Who will cry you a bucketful
You’ll never get my heart
Even though you are a part
Of the populous resentful

The winds of change are always blowing
And every time you try to stay
The winds of change continue blowing
And they’ll just carry you away

To the whiners against free trade
Who always belch such long tirades
If you had just stayed home
I couldn’t dedicate this poem
To the whiners against free trade

Are You Ready For (a) Divorce (from Your Strategic Source of Supply)?

You might think that divorce rates in North America are high, with some statistics as high as 50%, but in the business world, divorce is the name of the game. As a recent article over on Supply Chain Digest points out, no matter how valuable a strategic “supplier alliance” may be at various points of a relationship, for a high percentage of them, the relationship will change substantially and probably end somewhere along the way.

At some point in time, one of the following indicators will arise:

  • multiple requests on either side before action is taken
  • requests need to be made for items or services that used to be proffered without asking
  • the buying organization starts to feel that it is being “nickel and dimed” by the supplier

At this point, the “marriage” is coming to an end and you’ll start to see the commitment of the supplier decreasing rapidly, the sharing of information dwindling, and contractual language identifying each party’s dos and don’ts increasing … and you will know that problems are brewing.

So what do you do? Well, you start by calling in the corporate equivalent of the Ashley Madison Agency and discretely find yourself your next partner – before the current relationship ends and before you’re ready to even announce the shift.

As the article points out, you need a plan to end a strategic supplier alliance – and the most important part of the plan is knowing who your new strategic supplier will be. Strategic alliances exist because there is one or more functions that are critical to your businesses that you are not capable of performing yourself, or at least not capable of performing cost-effectively. This means that even if the current relationship is sour, you can’t just end it without crippling your business. Thus, you need to have a new supplier ready to take over.

Once you know who your new supplier will be, you’ll need to prepare for the transition. This will include:

  • getting the appropriate approvals to end the relationship
  • understanding the legal ramifications and taking steps to minimize the damages that could ensue (by working with Legal)
  • understanding which organizational groups will be affected, how they will be affected, and readying the information necessary to address their concerns at the appropriate times
  • understanding which systems and processes will be affected and outlining the necessary changes
  • creating a transition plan to transition from the old strategic partner to the new strategic partner

Finally, you’ll need to break it off. If you’ve done your homework, although it will be painful, it should go smoothly. Regardless, it will, as always, be an experience – so be sure to learn from it.

Supply Chain Inefficiencies Exacerbated by Lack of Visibility

As stated in a recent Supply & Demand Chain Executive Article, effective supply chain management is based on the ability to know the “what, where, when, and how” of your operations in real-time. However, it’s more than this. It’s the ability to understand the ripple effects and consequences from changes made to the processing of payables, receivables, shipments, and inventory. A “solution” could actually cause more problems than it solves if the full effects of its implementation are not considered.

To this end, the article Seven Studies in Supply Chain Visibility attempted to provide some examples of how a lack of visibility can cause importers and exporters challenges and headaches. Some of these examples illustrated the dangers of a lack of visibility from a trade and finance perspective, and need to be highlighted.

  • Transitioning to an Open Account from Letters of Credit can Cripple Suppliers
    Sometimes suppliers require letters of credit to finance their operations from the time they get an order to the time they get paid – even if they are located in the US – as a US supplier might source components and sub-components from foreign suppliers whose banks don’t recognize open-accounts as a basis for financing. The answer is to only use open accounts with suppliers where there is enough history to satisfy their lenders (or where a common bank that knows the financial status of each party) is used .
  • Rapid Growth can lead to Compliance Risk
    Rapid growth in international markets can create significant export compliance risk as every country has it’s own documentation, safety, and product composition requirements for each good you are exporting. Failure to satisfy even one requirement can have a shipment held-up, confiscated, or even destroyed. The answer is to bring in expert help from the outside to make sure everything gets done – and gets done right – during a rapid growth period.
  • Substantial Changes in Manufacturing, Distribution, and Process Execution can Pose Major Risks and Inflate Costs
    Done right – process improvement can increase efficiency and cut costs. Done wrong – attempted process improvement can slow everything down, produce waste, and increase cost. The key to success is to bring in some experienced change management consultants to guide you through the process.
  • Invalid Product Classifications Can Delay Shipments and Cause Taxation Nightmares
    HTS classification can be a nightmare. The answer is to use appropriate decision support software systems to guide you through the classification process, tax rate selection, and document preparation.

Designing for BPO and Shared Services recently printed an article from Alsbridge on Designing Your Organization for BPO and Shared Services. With one exception, it was quite good.

According to Alsbridge, there are three main components to the shared services model:

  • the service management organization, or BPO,
    which performs the shared services on behalf of the retaining organization,
  • the retained organization
    which is the organization “left behind” that retains all tasks not outsourced to the service management organization, and
  • the governance layer
    that manages the customer/supplier relationship, including service level agreements (SLAs), performance reporting, billing, and issue resolution.

This is dead-on. It’s good to see someone making it clear that the governance layer has to be treated as a separate entity. Some people seem to think there’s only two components: the service management organization and the retained organization, and that the retained organization should be responsible for managing the service management organization. This, of course, is very problematic. Typically, your retained organization consists of employees who didn’t negotiate the contract and don’t have the authority to tell the service management organization to “do their job and get it right” if the service management organization isn’t performing up to expectations, and they definitely don’t have the authority to withhold payment until the terms of the SLAs are met.

Of course, the point of the article was how to go about designing the 3-part model. According to Alsbridge, you should use a top-down design that defines, in succession:

  1. vision and strategy
  2. design criteria
  3. operating model
  4. shared-services organization structure
  5. retained organization structure
  6. job descriptions
  7. role profiles

while simultaneously using a bottom-up design, guided by the governance council, to flesh out the organization structures and job descriptions – if you want to arrive at the proper model.

The article takes deep dives into each of these steps, starting with vision and design principles, for which it gives the following examples.

  We will deliver a shared service organization that

  • increases the quality, efficiency, and speed of Procurement transaction services
  • improves reporting
  • delivers significant cost savings

Design Criteria

  1. organize to ensure flexibility and responsiveness to customer requirements
  2. minimize cost in delivering agreed service levels
  3. ensure clear roles and accountabilities
  4. structure to maximize work process effectiveness, quality, and excellence while exploiting economies of scale
  5. create a rewarding, challenging, and stimulating working environment

And, at this point, you realize that the article missed step 0, which I believe to be absolutely critical if you want to get it right.

Why are You Engaging a BPO?
Before you even start the process, you should have a good understanding of why you want to outsource part, most, or all of an internal function to a BPO. You need to understand what you are doing well, what you are not doing well, what could be done better, and why, and then figure out what tasks you plan to outsource and what tasks you plan to keep in house before you even begin the organizational design process. This is because the skill-sets need to do tactical procurement versus strategic supply-base identification versus contract negotiation are totally different and your organization design needs to reflect the tasks being done appropriately. How you plan to split up the work will affect your vision, your design principles, your criteria, your operating model, your shared-services organization structure, and your retained organization structure, because, let’s face it, sourcing and procurement is not like HR and Accounting.