Daily Archives: October 9, 2009

Finding the doctor This Fall

As you all know the doctor, who, unlike most (former) academics, doesn’t like to hear himself talk (which explains his predilection towards blogging), can be an elusive character to find (especially since he can only be found on the business networks). Nonetheless, he does emerge from the blogging burrow every once and a while and make a public appearance.

Right now, he is scheduled to be at the Mpower Group‘s Best Practices Xchange (BPX) Gaining a Voice in the Boardroom Executive Roundtable on October 23, 2009 in Oak Brook (Chicago), Illinois. Speakers at this event will include Mpower’s CEO Dalip Raheja who will present recent research on identifying the main roadblocks that prevent sourcing and supply chain groups from achieving world class performance and Professor Lloyd Rinehart of the University of Tennessee on creating cross-functional reality-based relationships to elevate the roles of sourcing/procurement. The event will also present case studies from a major Fortune 500 manufacturing company and a major Fortune 500 services company (that happens to be one of the largest utilities in the US and) that overcame the challenges of elevating their organizations from cost centres to strategic internal partners as well as a breakout session on success metrics.

If you are a director-level or above executive who is interested in attending this event, please contact Nicolas Hummer (nicoh <at> thempowergroup <dot> com or 630 268 8963) for more information on this invitation-only event. (They’ve promised me that they won’t be stingy with invitations, but space is limited.)

He’s also planning to attend the 7th Annual International Symposium on Supply Chain Management on Managing Global Supply Chain Networks in Uncertain Times in Toronto, Ontario on October 29 and 30, 2009. The full program for this event can be found on the web-site and this year it will cover country specific studies, management in turbulence, supply chain optimization, supply chain performance, technology, process management, and transformation. Keynotes will be given by Craig McLaughlin, the Vice President of NA Logistics at Cadbury, who will be giving a talk entitled “Leading in Uncertain Times” and Joseph Cavinato, the ISM Professor of Supply Chain Management, who will be giving a talk entitled “Procurement/Supply: The Most Opportune Time Ever”.

Supply Chain Finance: We’re NOT There Yet!

A recent article on the World Trade Magazine web site asked are we there yet in reference to Supply Chain Finance. To this, I must answer an emphatic NO!


First of all, thousands of business went out of business last year simply because customers, who obviously have no understanding of how financing should flow through the supply chain, wouldn’t pay on time and simply extended DPO as their method of “financing” themselves. (See They Killed Kenney.)

Secondly, as noted by Michael McKenzie of JPMC in the article, factoring is the “financing method” receiving the most attention. Factoring is not financing. It’s just a high-interest loan in reverse. “Here’s 80% of the value of your receivables.” How is that better than “here’s a 20% interest loan”? Think about it.

Thirdly, as noted by David Gustin of GBI, bank-assisted Trade Finance Products account for less than 15 percent of Trade Financing. Banks have all the money … and, generally speaking, they haven’t gotten it.

I could go on, but I don’t see the need because these three examples alone clearly demonstrate that supply chain finance, for the most part, is still far on the horizon.

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So You Think Shared Services Are the Way to Go

Continuing on yesterday’s theme of Service Management Mistakes, the Shared Services & Outsourcing Network also has an article that describes 10 more mistakes made when starting shared services that points out some questions you should ask before you consider making a move to a shared or outsourced services model.

  1. Will the Service Centre Accurately Estimate Your Needs?
    If you’re a small operation, it’s possible that the needs and requirements of the larger clients of the Shared Services Organization (SSO) might force themselves to the front of the delivery queue. Does the SSO understand what you will need, when you will need it, and what your priority tasks are?
  2. Are its allocation and chargeback models coherent?
    This is crucial to insure that you will be paying a fair price for the services received since you should be charged on actual utilization and not expected utilization.
  3. Does it have sufficient implementation-focussed governance mechanisms to insure success?
    A strong governance team is critical before transition to an SSO, during transition to an SSO, and after transition to the SSO to make sure that services continue to be executed efficiently. Not all issues will rear their ugly head during the prescribed implementation timeframe … some might wait a few more weeks, or a few more months.
  4. Is there an adequate change management architecture?
    Many projects fail due to underestimation of the amount of effort that will be required for change management and the support that will be required. Does the SSO have a well defined change management strategy that they will use to support the transition?
  5. Are interfaces addressed?
    Improved process can lead to great efficiency gains … which can be lost in a sea of disruptions unless you understand where the inputs are coming from, where the outputs are going to, and what other business units will be affected. Make sure that you don’t create more problems in your attempts to fix the ones you know of.
  6. Are you planning to transfer the right processes?
    A good SSO can managed transactional and knowledge processes. While they might not be able to strategically source your direct categories, they might be able to negotiate better savings on your telecommunications and office supplies contracts with greater leverage, or just collect the information faster.
  7. Do you have a clear SLA?
    While sensible SLAs are crucial to success, they have to be clear and comprehensible. According to Dick Locke, who has an entire state on his side, as a contract, they should have a reading ease of at least 40 and be comprehensible to someone with only an 11th grade education.
  8. Have you internalized the wisdom?
    While there’s no shortage of extremely useful guidelines to get you started, there’s no one-size-fits-all methodology for migration to SSO — be sure to have an experienced advisor on your side before attempting a transition.
  9. Have you identified the real constraints?
    While there will always be constraints with respect to finance, space, bandwidth, etc … accepting the constraints put in front of you without at least challenging them (in an effort to overcome them) will mean the difference between a world-class SSO relationship and one that merely gets the job done. Which organization would you rather be associated with?
  10. Have you accurately estimated the working costs?
    Have you costed the relationship to the nearest cent? Are you sure? There are operational costs, usage costs, management costs, oversight costs (which include communication and travel) and change management costs, for starters. Do you have to buy more software? Do you have to do custom integration work? Do you have to do process redesign? etc.

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