Monthly Archives: March 2009

Machine-To-Machine Strategies Could Lower Your Production Costs

A recent article in Supply Chain Digest noted that it was Time for Manufacturers to Take Stock of Machine-to-Machine (M2M) Strategies. The logic is that M2M — which leverages connectivity to communicate directly with one another — carries the potential to serve as a “game changer” that can dramatically reshape a company and how it goes to market.

Done right, M2M could enable companies and their customers to make faster and better decisions as there would be real time visibility into the status of each machine and production line it is part of. It will allow the development of closed-loop applications and processes where decisions can be transmitted and the results retrieved to verify the implementation of those decisions. It could reduce service costs as real-time monitoring of systems will indicate when preventative maintenance is required and could also reduce fuel expenses associated with fleet management.

It’s certainly something worth looking into if your production costs are high.

Winning Support from the CFO for Your Supply Chain Project

You can win over the CPO, the CIO, the COO and even the CEO, but if you don’t win over the CFO, chances are your project, even if it has an expected 10x ROI, won’t go anywhere if the CFO won’t cut the check. You need the support of the CFO, and fortunately for you, it’s not as hard to get as you think it might be if you do your job and demonstrate how the project helps the CFO do his.

Remembering that it is the CFO’s job to not only control cash-flow and monitor the financial health of the company, but to serve the shareholders, you should have no problem winning over the CFO over if you can clearly demonstrate that your project will improve the financial health of the company AND serve the needs of the shareholders in a reasonable time-frame.

But how do you do this? As I described in The Quest for Purchasing Fire on the e-Sourcing Wiki, you clearly define the value proposition, build the business case, create a great presentation, and, most importantly, address the concerns of the CFO.

What are the concerns of the CFO that you can address? As outlined in a recent article in i2’s Supply Chain Leader on linking the CFO to Supply Chain Execution, your well thought-out supply chain project should reduce the company’s cash-to-cash cycle times, reduce the company’s risk profile, support profitable growth, and deliver predictable revenue … big concerns of every CFO in today’s economy.

  • Reducing cash-to-cash cycle times
    If you increase your perfect order rate, you’ll optimize cash collection and shorten cash-to-cash cycle times. A number of projects will increase perfect-order rates. They include:

    • e-Procurement
    • Transportation Management Systems (TMS) and Warehouse Management Systems (LMS)
    • Just-In-Time (JIT) and Vendor Managed Inventory (VMI) initiatives
  • Reducing the company’s risk profile
    If your project addresses supply risk, currency risk, or total landed cost risk, it will reduce your company’s risk profile, and total cost.

    • Better inventory management will reduce supply risk and decrease costs as less shipments will need to be expedited
    • Negotiating contracts in relatively stable currencies, like the Euro, or your home country currency can reduce currency risk.
    • Implementing a global trade management system to help you insure compliance reduces the risks of customs delays, fines, and seizures.
  • Achieving profitable growth
    If you can calculate the top-line and bottom-line returns of your project, you can win the CFO over more quickly.

    • E-procurement systems will instantly eliminate high manual invoice processing costs, which are between $30 and $90 in an average organization
    • e-Sourcing platforms with decision optimization will cut at least 10% off your total spend, and keep it off
    • indexed contracts will insure that your price increases never rise more than raw material costs and, more importantly, insure that you see price decreases when commodity indexes drop
  • Deliver predictable revenue
    A project that you can repeat month after month, such as the application of e-Sourcing to category after category, or spend-analysis on different areas of the business which looks at the data in different ways, can deliver long-term predictable revenue streams. If you identify projects that keep on giving, your CFO will be very happy.

Recent Additions to the #1 Supply Chain Resource Site

The Sourcing Innovation Resource Site, always immediately accessible from the link under the “Free Resources” section of the sidebar, continues to add new content on a weekly, and often daily, basis. Unlike many “resource”, “best of”, or “portal sites” that are abandoned almost as quickly as they are thrown together, the resource site is actively maintained (and dead links are removed on a regular, usually weekly, basis).

In fact, there have been almost 260 resource additions in the past week alone, including:

  • 20 new Conferences,
  • 10 new Webcasts, and
  • 224 new Archived Webcasts.

The total number of unique, active resources is approaching the 2,400 mark, and breaks down as follows:

And includes the following recent additions, among many others:

Conferences

Dates Conference Sponsor
2009-Apr-4 to
  

2009-Apr-8

 Healthcare Information and Management Systems Society
  

Chicago, Illinois, USA (North-America)

 HIMSS
2009-Apr-5 to
  

2009-Apr-7

 Smart and Sustainable Campuses Conference
  

College Park, Maryland, USA (North-America)

 NACUBO
2009-Apr-28 to
  

2009-Apr-28

 FinovateStartup09
  

San Francisco, California, USA (North-America)

 Financial InSite Inc
2009-May-11 to
  

2009-May-13

 Entrepreneurial Finance & Factoring Conference
  

Chicago, Illinois, USA (North-America)

 CFA
2009-May-12 to
  

2009-May-14

 Electric Power
  

Chicago, Illinois, USA (North-America)

 Zachry
2009-Jun-8 to
  

2009-Jun-9

 Lean & Green Summit
  

Savanna, Georgia, USA (North-America)

 AME

Webcasts

Date & Time Webcast
2009-Mar-27

11:00 GMT-04:00/AST/EDT

 Spend Analysis Demonstration : The First Three Important Steps to Savings
  

Sponsor: Enporion
2009-Apr-2

10:00 GMT-04:00/AST/EDT

 Best Practises in Spend Management for Law Firms
  

Sponsor: Aderant
2009-Apr-7

14:00 GMT-04:00/AST/EDT

 Generating Working Capital in Today’s Credit Crisis
  

Sponsor: Receivables Exchange

which are all readily searchable from the comprehensive Site-Search page. So don’t forget to review the resource site on a weekly basis. You just might find what you didn’t even know what you were looking for!

And continue to keep a sharp eye out for new content and even more new content categories which will be coming on-line in the near future!

Fine-Tune Your RFPs for Streamlined Performance (Software Acquisition Insider Tips VII)

A recent article over on Supply Management . com on going faster pointed out many of the problems with RFXs that cause unnecessary process delays. Fixing these problems will enable your RFX process, which you now know how to construct in an unbiased fashion, to flow smoother and faster.

  1. Poor Scope
    The scope is not clearly defined at the start of many RFP processes. “A solution to automate our purchasing” is extremely vague as is “50,000 boxes”, which a quick trip to cBoxBid will quickly point out. (Dimensions? Style? Weight/Flute? Glue Tab? Printing? Color? etc.) The scope needs to cleary define what is required (automation of purchase order creation, invoice collection, and e-payments or 12″*12″*8″ boxes that can hold at least 45 lbs) and the desired outcomes (automated tactical processes with m-way matching and manual review only required on discrepancies and purchases over administrator defined thresholds or 5,000 boxes per shipment with 21 days notice).
  2. Lack of a Performance Regime
    The long-term success of a major contract will depend on a mix of “hard contractual” and “soft behavioural” factors. It is imperative to define success via a comprehensive performance regime with a simple hierarchy of performance measures and targets, and a mechanism for rewarding good service and deterring underperformance.
  3. No Team Empowerment
    Like every other sourcing and procurement activity, a successful RFX (process) requires a dedicated and fully supported team. A core team, authorized to make the necessary decisions, is required throughout the process and beyond to ensure consistency and clarity with the bidders.
  4. The Contract is an Afterthought
    The RFX should be presented in a format that matches the product or service being requested and should fully explain the selection process, the evaluation criteria, the rules of engagement, the delivery schedule, and the terms and conditions. In other words, the contract (template), which should clearly specify what is and is not negotiable, should be drafted up front and presented to all participants. Otherwise, you might work through a long, laborious RFX process only to find out that the winning bidder(s) can not, or will not, agree to your terms and have to go back to the drawing board.
  5. The Process is Not Managed
    The largest risk in any RFX process is a misunderstanding, and the sad thing is that this is very likely if sufficient information is not made available to the bidders and the process is not managed. It’s important to manage the process and communicate with the bidders at each step to make sure they have received all of the materials, understand all of the requirements, and have all of the information they need to craft their responses. The process should include regular briefings, review meetings, and question and answer sessions to insure that it flows smoothly.

Supply Chain Performance Improvement For the Beginner

Industry Week recently ran an article on supply chain performance improvement for the rest of us that is a good read for any organization just starting down the supply chain improvement path. The article outlined four strategies which can be used to jump-start a performance improvement initiative in an organization that is not best-in-class, or, in layman’s terms, your average organization. (Less than 20% of organizations are truly best-in-class, and the reality of supply chain improvement is that you need to do it in stages and trying to bite off too much too fast will just lead to failure.)

  1. Stop Obsessing Over Six Sigma
    It’s not the methodology, but where you apply it and how you use it to better your operations. It’s about leveraging the chosen process life-cycle improvements to focus on customer-visible process improvements, not about the processes themselves. Eventually you’ll want to optimize every process to the nth degree, but not when you’re starting out. An 80% improvement across the board is much better than a 98% improvement on one process that only affects 10% of production. After all, would you rather be 1.8 times as productive as a whole or 1.198 times as productive?
  2. Forget About “The Perfect Order”
    The “Perfect Order” is Supply Chain Nirvana, and every budding Buddhist knows that this is a lifelong journey. You need to start by improving your basic processes, which will minimize errors, and managing the mistakes (or order exceptions) better when they do happen. Install visibility systems that allow you to identify and deal with exceptions as soon as possible and the process improvements this will inevitably lead to will result in a significant drop in errors almost overnight.
  3. Pay Your Suppliers Better
    This will save your company money. Not only will it strengthen vendor relations, which could lead to happy suppliers willing to share insights and best practices and go the extra mile, but it will reduce the amount of capital the supplier has to borrow, which usually comes at a high cost. This reduces the supplier’s cost of capital, which reduces the supplier’s overhead, which decreases the mark-up the supplier has to charge, which enables the supplier to offer early payment discounts or charge you less (at renewal time).
  4. Don’t Talk to Customers
    Stop wasting time haggling over credit and other meaningless disputes. Automate the dispute resolution process and spend time listening to your customers’ product and service interests and business process priorities instead. That way you can find out what your customers really want and improve your offerings accordingly.