Monthly Archives: April 2009

A Procurement “Metric of the Month” is a Bad Idea

As a prominent blogger, I get a lot of e-mail (or should I say spam?). One of them had “Procurement Metric of the Month” in the title. I was about to trash it, as this is one of the worst ideas I’ve ever heard (as I’ll explain shortly), but then I noticed it was from Hackett. Needless to say, this got my attention. Why would one of the leading research firms in the space, which produces the very useful and relevant Book of Numbers, be touting a “metric of the month”?

It turns out they weren’t promoting a “metric of the month”, which would be an incredibly bad idea because a metric is only useful if you benchmark against it month after month after month for an extended period of time to measure your progress (and changing metrics too often gets you absolutely nowhere), but a new free research offering as part of their Hackett Performance Network (where, if you qualify, you can get access to selected research reports, performance studies, and webcasts). Designed for Finance, HR, IT, and Procurement, this new offering is apparently going to showcase an important metric in each area each month, starting with “Tax Book Entries Requiring Correction Percentage”, “Outsourcing Utilization by HR Process Category”, “IT Business Value Contribution through Portfolio Optimization”, and “Level of Supply Risk Management Adoption”.

With respect to the latter metric, which focusses on procurement, Hackett points out how 67% of world-class organizations implement supply risk management consistently across the business as compared to only 13% of their peers, indicating that top performers are 5 times as likely to have a comprehensive supply risk management strategy. Considering that effective supply risk management is a way for procurement to elevate its value proposition and help the business protect its brand, cost leadership, and stability, this makes sense. It’s free, so check it out. Just don’t take “metric of the month” literally.

The Market Dilemma I: The Key to Getting Out of this Recession

I’d hoped I wouldn’t have to state the obvious, but everywhere I look it’s doom and gloom together with ridiculous economic explanations pulled out of a depth so dark that even a proctologist with a flashlight would have trouble finding the source, when the answer is extremely simple. In fact, I can sum it up in one word. FAITH.

And no, I do NOT mean faith in your God, a God, Gods, what you perceive my God or Gods to be, deities, supernatural beings, faith healers, shamans, or any other religious entity you might care to believe in.

Nor do I mean faith in the government, Wall Street, or other people in power to “make the right decisions” and “pull us through this”.

I mean faith in the system. Like religion, systems only work (and catch on in the first place) if people believe in them and have just the right amount of faith*1. Too little faith, and things fall apart. Just like the influence of a religion will decline until it eventually disappears if people stop believing in it and making it part of their daily life, the strength of the system will degrade when people stop buying, selling, and participating in the system on a daily basis … until it starts to fall apart. Similarly, too much faith will lead to problems. Just like overzealousness led Middle Ages Christians to the Crusades and small groups of Muslims to the extremist jihads of today, too much faith in the market leads to overzealous buying, selling, evaluations, and run-ups that are unsustainable and lead to crashes. In other words, too much faith broke the system, too little faith is preventing its recovery, and just the right amount of faith will fix it.

The only way out of this mess is BUSINESS-AS-USUAL. As I’ve been saying for months now (in my Dumb Company, Dead Company, and Your Marketing series … see my recent rant), business people must accept that the path to business-as-usual IS business-as-usual. In a free market economy, this includes bankruptcy (which, as Robert Rudzki points out, is vital to capitalism). We must conduct business as usual (without unrealistic assumptions of demand or profitability increase … remember, slow and steady wins the race), or we’re going to stay in a quagmire. And in this space, as I’ve repeatedly said, the leadership has to come from solution vendors and consulting firms because the majority of buyers work in organizations where the CPO is not part of the C-suite and can’t directly influence the path of their company.

Faith should start with, above all else, faith in yourself and your ability to make a positive impact on your company, your industry, and the economy in general. This requires making smart decisions each and every day. Over the next three days I’ll be offering up specific starting-point suggestions that solution vendors, consulting shops, and buyers can use to get their organizations, the industry — heck, maybe even the economy — back on track.

 

*1 For those of you who don’t see a connection between religion and economic models, try to look at modern culture through the eyes of a future “new” archaeologist with a strong anthropological bent. Such an archaeologist would say that societies are strongly influenced by people’s beliefs, and people’s beliefs are strongly influenced, and part of, their religion. Based upon the remnants we’re likely to leave if we vanished today, this future archaeologist would see almost universal evidence of technology and commerce but only pocket evidence of the many different religions that are practiced today. Said archaeologist may in fact be led to conclude that the major religion of our time was capitalism. Now, I’m sure my intelligent readers will find as many arguments against this as for, but it is something to think about.

Upcoming Events from 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 over 50 resource additions in the past week alone!

The total number of unique, active resources exceeds the 2,600 mark, and breaks down as follows:

 

  •   21 Analyst Firms
  • 157 Blogs
  •   23 Centers of Excellence
  • 634 Companies
  • 169 Conferences
  •   26 Job Sites
  •   29 Journals
  • 316 Linked-In Groups
  •   14 Newsletters
  •   55 On-Demand Classes
  •   38 Press Release Services
  •   68 Podcasts
  •   60 Publications
  •   12 Roundtables
  •   91 Seminars
  •   91 Societies
  • 236 Training Classes
  •   36 Webcasts
  • 504 Archived Webcasts
  •   24 Workshops

 

And includes the following upcoming events, among many others:

Conferences

Dates Conference Sponsor
2009-Apr-26 to

2009-Apr-28

 HSCN National Healthcare

Toronto, Ontario, Canada (North-America)

 HSCN
2009-May-3 to

2009-May-8

 TDWI World Conference Spring 2009

Chicago, Illinois, USA (North-America)

 TDWI
2009-Sep-23 to

2009-Sep-25

 Growth & Innovation Forum 2009

Miami, Florida, USA (North-America)

 Consumer Goods
2009-Oct-18 to

2009-Oct-21

 Business & Technology Leadership Conference

Orlando, Florida, USA (North-America)

 Consumer Goods

Webcasts

Date & Time Webcast
2009-Apr-15

11:00 GMT-05:00/CDT/EST

 Guidance for the Industry: Good Importer Practices

Sponsor: CSCMP
2009-Apr-16

11:00 GMT-04:00/AST/EDT

 How to Boost Service, Cut Costs and Deliver Great Customer Experiences – Even in an Economic Downturn

Sponsor: Teradata
2009-Apr-22

14:00 GMT-04:00/AST/EDT

 Software as a Service

Sponsor: Synergy Resources

Training Classes

Dates Training Sponsor
2009-Apr-20 to

2009-Apr-20

 e-Auctions in 10 Easy Steps

Solihull, England, UK (Europe)

 CIPS
2009-Apr-20 to

2009-Apr-20

 Skills for a Recession

Crawley, England, UK (Europe)

 CIPS
2009-Apr-21 to

2009-Apr-21

 FUNDAMENTALS OF PURCHASING

Schaumburg (Chicago), IL, USA (North-America)

 Nahabit
2009-Apr-21 to

2009-Apr-24

 Kaizen Promotion Office Workshop

Durham, North Carolina, USA (North-America)

 TBM Consulting Group
2009-Apr-27 to

2009-May-1

 Supply Chain Management Executive Education

Ponte Vedra Beach, FL, USA (North-America)

 Fisher College of Business, Ohio State University

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 you were looking for!

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

What to Look for in a Talent Management Application

A recent Industry Week article on “talent management technology: automate and analyze your metrics” claimed that the combination of technology, tech saviness, and concrete planning ultimately guarantees best-in-class talent management. Although I would disagree, as this leaves out the facts that you need a solid understanding of what “talent” is and what “talent” needs to do in order to effectively manage it, technology, tech savviness, and concrete planning are still necessary conditions of good talent management and any good advice you can get on these aspects is good advice you can use.

The article provided good advice in the form of five factors that you need to consider when selecting a talent management application, which will form the foundation of your talent management activities. The factors were:

  • Establish Clear Business Goals
    What are the primary goals of your talent management — better retention, improved knowledge management, ROI? You need to understand what you need before you can select the right application.
  • Think Smart, Think Strategy
    How is the tool going to help you? Performance evaluation support? Key trend identification? Surveys? Skill / Knowledge Tracking? This helps you select a tool with the right functionality.
  • Seamless Integration
    How well will it integrate with your current HR and Knowledge Management Platforms? If you have to rekey data through manual processes, it’s probably not the right solution for you.
  • User Friendly Software
    An application that isn’t easy to use isn’t used.
  • Proven Client Satisfaction
    Talk to long-term clients of the provider and make sure that the tool is still working for them after the initial shine has worn off. You want a solution from a provider who stands behind it for the long run.

And they are definitely factors you can’t overlook when selecting any software solution, not just talent management.

Downturn Survival Strategies from PWC

The Global Supply Chain Council recently published a piece by Robert Barrett, a Director in PricewaterhouseCoopers that, for the most part, had some great “strategies to survive in a downturn”. Considering that it will likely be at least six months, if not eighteen, before we start to claw ourselves out of this recession (longer if companies decide to stay dumb and wait until natural selection gives us yet another dead company), they’re definitely worth yet another review.

It’s important to remember that recessions create winners as well as losers AND companies that effectively manage the downturn have a higher likelihood to emerge more quickly during the upturn (and win big).

  1. Focus the Business
    During a downturn a clear focus on the key business drivers is essential to ensure resources are allocated to those areas that deliver most value to the business. Three tactics you can use include:

    1. Product and Item Rationalization
      Simply put – Go Lean! Considering that, in an average organization, up to 30% of products are actually loss-generators when you correctly allocate direct and indirect costs, focusing on core, revenue generating products can quickly turn a balance sheet from one that’s in the red to one that’s in the black.
    2. Scrap Special Trade Relations and Promotions
      Up to 75% of promotions lose money and fail to generate long-term sales and only lead to reduced forecast accuracy, complexity, and management cost.
    3. Customer Profitability
      Focus on the customers that you can impact significantly while making a reasonable rate of return. In some companies, up to 25% of customers are actually loss-generators. They should be weeded out and the resources re-allocated to your most profitable customers.
  2. Generate Cash
    1. Optimize the Order-to-Cash Cycle
      Inefficiencies leave cash on the table and sub-optimal credit decisions cost you and your customers.
    2. Optimize the Procure-to-Pay Cycle
      Inefficiencies increase processing costs and result in the loss of rebates and early payment discounts. Inefficiencies also result in delayed payments to suppliers, forcing them to borrow at unfavorable terms, which increases their overhead and ultimately increases your costs.
    3. Tie Forecasts to Demand Drivers
      Excessive Inventory is a big drain on cash, and lost sales are a big drain on revenue. Fix them.
    4. Implement all identified 3X+ savings opportunities that can be realized in the next 12 months.
      Everyday I hear of yet another company hemhorraging cash who has decided to delay yet another opportunity to generate a 3X, 5X, 7X, or 10X return because it will require a small investment of cash up-front or prevent them from reducing head-count, which is NOT a sustainable method of cost reduction. Considering that many service providers are now offering pay-per-performance models, where you don’t pay until the contract is signed or the new process is implemented, this is ludicrous! (And any company that doesn’t latch on to a guaranteed savings opportunity in this market deserves to fail.)
  3. Review Trading Partnerships
    Companies commonly lack alignment between sales teams and their finance departments, leading to ineffective development and execution of commercial terms. The elimination of non-standard terms can often lead to quick bottom line savings.
  4. Improve Buying
    Considering that a 5% reduction in costs can result in a 50% profit improvement, this should be top of every agenda. And there are dozens of service and SaaS solution providers who can help you do this with little, or no, money down. You have nothing to lose and everything to gain.
  5. Implement a “Lean Office”
    Eliminating low-value activities and reducing bureaucracy at the office is a quick and effective way to reduce costs and to improve responsiveness to the market. When you consider that during previous downturns, companies have reduced the size of their head offices by 15 percent to 25 percent without a noticeable loss of performance, there are probably numerous savings opportunities that can be realized by better processes and technology.
  6. Improve Productivity
    Not only will this improve cost efficiency, but it will increase customer satisfaction, which is critical to retaining profitable customers in the current economy.