Daily Archives: December 10, 2008

Subscribe … and Take Your Knowledge to the Next Level

As a regular reader of Sourcing Innovation, you’re on a quest to continually expand your knowledge of sourcing, procurement, and supply chain vendors, technologies, and best practices as this helps you to be the best professional you can be. The best way to do that is to make sure you stay on top of the wealth of free information available to you. One way to do so is to check the blog daily and watch for new additions to the sidebar (under “Free Resources“) and the resource site. Another way is to Subscribe. You can receive Sourcing Innovation blog posts in your inbox as well as newsletters, special announcements, and direct links to the latest resources available to you.

In addition, you can also sign up for the Next Level Purchasing Free Purchasing Resources Program which gives you free access to the Managing Supplier Performance course, a new purchasing tips article in your in-box every two weeks, and first access to Next Level Purchasing white-papers, including the 2008 Purchasing & Supply Management Carer & Skills Report.

The last two articles have been quite insightful. In Cost Reduction Ideas (Beyond Sourcing), Charles Dominick, the President of Next Level Purchasing, with the help of Rob Patton of Paladin Associates, outlined four ideas for achieving cost reductions without switching suppliers, including:

  • Ask & You May Receive
    Sometimes your suppliers have cost saving ideas … all you have to do is ask them.
  • Aggregation
    Aggregate your need, especially for a commodity item, with other buyers.
  • Specification Rationalization
    Use industry standard components and standardize on as few as possible.
  • Leveraging the Supply Chain
    If you have multiple suppliers buying the same raw material, consider buying it for them if the combined volume nets a lower price.

In Supplier Partnerships: Your End of the Deal, Charles identified four common supplier goals that you can help your suppliers achieve. Helping your suppliers achieve their goals increases their commitment to your needs for cost reduction as a buyer — and I don’t think anyone can say they don’t need cost reductions in today’s market. The contributions you can make include:

  • Reduced Payment Cycle
    Right now, your suppliers are suffering from a credit crunch and most likely hurting way more than you are. Pay them in a reasonable time-frame, and go to the top of their favorite customer list.
  • Reduced Complexity
    Customized reports, unique packaging requirements, and other “special requirements” come at a cost to your supplier (and, ultimately, to you). Eliminating unnecessary services, especially those without value-add, will reduce your supplier’s costs … and yours.
  • Better Sales Forecasts
    This is actually a two-for-one. First of all, providing your supplier with better sales-forecasts will help it insure that it buys only what it needs to make your products. Buying more locks up cash in inventory that it can’t afford to lock up right now, and buying less means it will have to pay more on spot buys. Secondly, you can commit to multi-year deals, which increases your supplier’s confidence in future sales, and revenue–targets. This keeps your supplier on stable footing and keeps you on the preferred customer list.
  • Testimonials
    Suppliers need sales now more than ever. If you will step up and certify the quality and reliability of the supplier to the marketplace, that will increase the supplier’s business and stability. Not only will this make you a favorite customer, but it will decrease your risk that your supplier goes out of business when you need it most.

If you haven’t, I would consider signing up for Next Level Purchasing’s Free Purchasing Resources Program. In my view, there are not enough good quality free resources out there, and you should take advantage of the few there are. And besides, when you consider that the last mailing reached over 97,500 subscribers, you know that it must consistently deliver information that you can use.

Supply Chain Management Implementation Risk Minimization

As both an enterprise software expert and a supply chain technology expert, it’s a safe bet that the recent article in i2’s Supply Chain Leader on Minimizing Risk During SCM Implementations would get my attention. The reality is that a poorly executed supply chain management implementation across an enterprise can destroy your business. The 2.25 Billion Inventory write-down that Cisco had to take in 2001, due to a breakdown in its supply chain forecasting and visibility systems, might have been bad, but Foxmeyer, who in 1996 was the 2nd largest wholesale drug distributor in the US with annual sales over 5 Billion went out of business thanks to an ambitious IT revamp, that included a massive enterprise wide ERP upgrade to manage and automate its supply chain and distribution. It sold in a bankruptcy fire sale to a larger rival for a mere 80 Million.

As the article notes, while innovative SCM processes and technology tools have the strength and capability to revolutionize an organization, they can also disrupt business as usual, at least in the short term. And if not handled properly, SCM implementations can disrupt processes and technology in the long term as well … and even affect the viability of your business! They have to be intelligently managed, and risks have to be identified, mitigated, and monitored from the start.

As the article notes, the project team can’t just focus solely on achieving the deliverables when they are planning a new SCM implementation. They have to consider the risks that may arise during post-implementation, when the solution will be subjected to multiple process and technology changes that it will need to support, and possibly risk business viability. As the article points out, broader issues such as long-term performance and scalability, operating environment and hardware, and reporting and connectivity must be considered up-front to mitigate future risks.

So what advice does it gives? It provides the following three tips:

  • Identify Every Risk

    Collect information from multiple stakeholders and perspectives, identify any potential risks, asses them, and manage those that are likely or would have a severe impact if they occurred.
  • Track Critical Risks Over Time

    Information on the relative priority, likelihood, and status of of any risk should be available, and up-to-date, at all times.
  • Ensure Ownership of Solutions and Associated Risks

    Make sure that everything you implement is identified, documented, tracked, and maintained. No under-the-radar implementations without proper documentation and knowledge transfer. Otherwise, the next system update will be a total disaster when multiple systems that people depended on to their job, that no one in IT or upper management knew about, just disappear.

Not bad advice, but it only scratches the surface, doesn’t give you anything you can really use to start (or track your efforts), and, most importantly, doesn’t give you the best advice of all:

  • Bring in an Independent Expert
    Don’t trust yourself, or your vendor, to do it right. Let’s be honest … you’re not an expert in enterprise software, implementation, and integration and your vendor is not an expert in your business. You might use the same vocabulary, but, fundamentally, you don’t speak the same language (or at least not fluently). Bring in an independent third party who is an expert in both supply chain software and IT project management and in supply chain processes, and supply chain process reengineering, to manage the planning phase to insure you don’t miss any key risks, that you select the right systems, and that the implementation doesn’t disable functions or miss modules that you really do need for a subset of your staff to do their jobs. The right plan will go further to mitigating risk than any mitigation effort ever will. I guess what I’m saying is, if you don’t know where to start, don’t be afraid to call the doctor, because, nothing beats preventative medicine.

Just remember, Consultants are Cheap and it’s easy to get Maximum Value from Your Consultants.