Daily Archives: February 20, 2009

The Strategic Sourceror’s (Supply Chain) Anti-Trends

The Strategic Sourceror was first to the plate with a trio of home-run anti-trends for 2009.

  • Strategic Sourcing Outsourcing Finally Gets a Good Rap
    The Sourceror notes that even though the list of anti-outsourced strategic sourcing excuses (just like the list of excuses for why we don’t need no consultants) goes on and on and on, this is the year that people who just made a big investment in (e-)sourcing software realize that software alone is not enough and you need to balance the tools with the human expert techniques.
  • Networking Costs You That Job
    Every time the economy takes a bath in the crapper, every person and his dog comes out of the woodwork with a list of techniques for landing that next job, and networking is always at the top of the list. And this time, the media has outdone themselves and convinced people that “networking” means getting in touch with every single person you have ever heard of in your life and bombarding them with your resume and story … every single day. Now, while you should contact everyone who you honestly think could, and would try to, help you, and while you should be persistent in your job hunt … there’s persistence, and then there’s good old fashioned harassment. Go overboard, and you might just find that you’re the first person blackballed next time something opens up.
  • Hasta la Vista to the Fat Cats
    This post is just too good to every try to summarize.

Cut, Cut, Cut is Not a Strategy (for Supply Chain Cost Reduction)

Jim Tompkins (of Tompkins Associates), who gave one of the best presentations I’ve ever attended at last year’s SCL Conference on Creating a Resilient Supply Chain when he said that his top three tips to bold leadership success were:

  • Don’t Do Anything Stupid,
  • Focus, and
  • Kill the Left Suckers

recently contributed a great article to Supply Chain Brain on the riddle of supply chain cost reduction. In it, he notes that you should not simply “follow the leader” and cut [payroll], cut [advertising], cut [consulting], cut [strategic initiatives] like many (supposedly) “smart” companies are doing, because cutting is NOT a strategy that leads to success.
Across the board cuts, without understanding where your company’s real profitability lies, results in average performance at best and leaves your organization wide open to failure at worst
(and gives you a failing grade on the doctor‘s Corporate Intelligence Rating).

The key to cost reduction is to break down your costs into

  1. capital and operating costs,
  2. talent costs, and
  3. strategic costs (for profit improvement initiatives)

and align your costs with your vision and model for success. When you do that, you see that category 1 costs are ripe with opportunities, category 2 costs need to be carefully analyzed, and category 3 costs need to be protected. Did you negotiate your lease during a boom? Is a multi-million dollar enterprise system contract nearing expiration? When was the last time you looked at your outsourcing / support agreements? Operating costs are ripe with opportunity! In comparison, talent costs are a different story. Although many companies are quick to ditch high cost talent, the reality is that doing so usually leaves them in a situation where they are unable to pursue million-dollar savings opportunities because they failed to realize that top talent was paid top dollar for a reason — they were the individuals capable of implementing strategic cost savings opportunities, which should be protected at all costs.

So how do you achieve true cost reduction? Jim recommends you take a holistic-view of your supply chain and focus on Buy-Make-Move-Store-Sell(-Right_Size-Outsource). Specifically, start with:

  • Buy Sourcing
  • Make Lean Manufacturing (Waste Reduction)
  • Move Internal and Domestic Transportation
  • Sore Distribution Centers
  • Sell Inventory Management
  • Right-Size IT Systems
  • Outsource Non-Core & Strategic Operations

And don’t forget to take advantage of the many service providers who are capable of helping you reduce your category 1 costs (often on a contingency / no up-front cost basis). As Jim points out, transportation costs, purchase costs, customs and duty costs, inventory carrying costs and distribution center costs are all very, very important expenses that in these difficult times need to be reduced, and you should do so aggressively and intelligently. The answer to the riddle is an integrated, holistic approach that increases profitability and puts your company in a stronger competitive position.

Great advice — and you can get more by reading reading the article and consulting the Tompkins Associates Publication Library.