Daily Archives: April 29, 2010

The Best Argument for Supply Chain Risk Management

Forget Eyjafjallajokull, and the ash cloud that didn’t exist. The biggest risk to your supply chain is not an unexpected natural disaster. It’s the people in, and around, your supply chain … and the nutjobs that will overreact when there is no plan in place to follow.

The best argument for supply chain risk management, as outlined in recent research from Manchester Business School (reference), is the simple fact that 88% of supply chain interruptions are the consequence of human action. This includes accidents, production problems and labour unavailability due to poor planning, strikes, thefts, and cyberattacks. This means that a good supply chain risk management strategy can mititage 9 out of 10 potential disruptions.

Moreover, if your risk management plan focusses on generic, and not specific interruptions, such as “our primary air carrier and/or mode of transport becomes unavailable for more than 3 days”, you can even mitigate the effects of some natural disasters! So get planning!

Don’ts for Procurement Leadership, Part I

A recent article in the CPO Agenda had some good Dos and Don’ts of Procurement Leadership that are worth repeating. Today we’re going to dive into five of the don’ts and put an SI slant on them. DON’T:

  • Overpromise

    Procurement still doesn’t have the recognition that Marketing, Sales, Legal, and other traditional business functions have. And we’re not going to get it if we set expectations we can’t deliver on. So while it’s important to promise (almost) as much as you can to get notice, it’s even more important not to over-promise.

  • Overreact

    You’re going to face countless challenges and frustrations on a daily basis. It’s part of the job. Trust in your ability, and that of your team, to get through it, because if you overreact, the C-suite might think that maybe you’re not ready to be a business leader and even considering outsourcing your department and you.

  • Limit Your Ambitions

    A CPO is an agent for change. You should always be striving to find ways to do better.

  • Miss An Opportunity

    Be sure to sell your success ever time you’re in front of a C-Suite Executive or a Board Member. It’s part of The Quest for Purchasing Fire.

  • Spread Yourself Too Thin

    Be sure to focus on the biggest priorities and cost reduction opportunities first. There’s always next year for the other opportunities, and maybe changing market conditions will allow for greater cost reductions on those opportunities next year. If you’re not sure where to start, do a spend analysis. After all, with a real spend analysis tool, the traditional reasons why data analysis is avoided are irrelevant.

What is Strategy? And How Is It Obtained? (Part III)

Part I reviewed the definitions of strategy offered by Alfred D. Chandler Jr., Kenneth R. Andrews, Michael E. Porter, Thomas J. Peters and Robert H. Waterman Jr., Richard N. Foster, Andrew S. Grove, and Henry Mintzberg, who are generally thought to be (among) the preeminent strategists of the last 50 years. It then indicated why each, on its own, was not sufficient. Part II looked at the definitions provided by Richard Whittington, Gordon Walker, and Robert Wittman and Matthias P. Reuter and derived not only some generic approaches to strategy, but many of the essential elements that a strategy needs to have. This allowed for the derivation of the following, working, definition of business strategy:

a comprehensive rational plan of action to achieve one or more goals designed to give the organization one or more competitive advantages consistent with the long term sustainable vision of the organization that addresses historical and emerging market patterns, emerging markets and technologies, resource allocations, offensive and defensive actions, organizational and customer cultures, and the people who will make the plan work.

Having this definition is a great start, but it doesn’t provide any insight as to how a business strategy is derived, which is the precursor to a successful supply chain strategy. This post will look at some of the different proposals out there and then, in Part IV, look at harmonizing them into a workable approach that can be used to get started.

The first thing one notices when the “strategy guides”, that purport to address formulation and execution, are examined is that most define strategy as that which addresses a set of critical issues or requirements and do not provide a framework for its construction.

For example, Lawrence Hrebiniak, author of Making Strategy Work: Leading Effective Execution and Change and the corresponding article on Making Strategy Work: Overcoming the Obstacles to Effective Execution in the Ivey Business Journal lists the following critical issues that must be addressed by an effectively formulated strategy:

  • Having an Implementation Model to Guide Execution Thoughts and Actions
  • Remembering that Sound Strategy Comes First
  • Structure is Important to Successful Implementation
  • Care Must be Taken to Translate Strategic Objectives into Short-term Operating Metrics
  • Clear Responsibility and Accountability are a Must for Effective Execution
  • Reward the Right Things – Use Incentives to Support Execution Processes and Outcomes
  • Ensure the Development of Appropriate Capabilities and Managerial Skills to Make Strategy Work
  • Focus on Managing Change

Then there are W. Chan Kim and Renee Mauborgne who, in Blue Ocean Strategy, indicate that the goal is to make the competition irrelevant and state that the formulation of a “blue ocean strategy” involves

  • the reconstruction of market boundaries,
  • a focus on the big picture, not the numbers,
  • a reach beyond existing demand, and
  • getting the strategic sequence right.

In Be Different or be Dead, Roy Osing indicates that construction of a BE DIFFERENT strategy involves the following eight steps, which are intermixed questions and actions that also seem to be devoid of a unifying framework:

  • How big does management want the organization to be? Set growth and financial goals first.
  • Who should the organization serve? Choose target customers that will satisfy big goals.
  • How will the organization win? Construct the ‘only’ statement to separate the organization from the pack.
  • Create the strategic game plan. It should make a good strategy elevator speech.
  • Define the critical objectives to achieve 80% of the strategic game plan.
  • Assign accountability for each objective.
  • Be insane about execution.
  • Monitor, review, learn, and adjust during execution.

And Gary Neilson, Karla Martin, Elizabeth Powers take a similar approach in The Secrets to Successful Strategy Execution in the Harvard Business review. Basically, they harp on the importance of a plan that:

  • clarifies decision rights,
  • designs information flows,
  • aligns motivators, and
  • makes structural changes.

Basically, the only “frameworks” out there are Porter’s Five Force Analysis, Strategy Mapping, Value Stream Mapping, the Blue Ocean Strategy Framework, MACS (Market-Activated Corporate Strategy Framework), the McKinsey 7-S Strategy Framework, and Scenario Planning. But none of these are general purpose frameworks that can be used ubiquitously. Porter’s five forces only indicate whether or not a strategy has a chance of succeeding, not how to go about formulating it. Strategy mapping, which grew out of Kaplan’s and Norton’s work on the Balanced Scorecard, is very performance and metric centred, which is useless for entirely new initiatives. Value stream mapping is highly customized to (lean) manufacturing. The Blue Ocean Strategy doesn’t apply if creating an entirely new market isn’t feasible. The MACS framework is based heavily on financial planning, which may not be feasible early on in the strategy formulation process. The 7-S Strategy framework has been highly customized for IT and Scenario Planning and helps in the identification of scenarios that need to be addressed, but provides little in the way of resolutions.

In other words, most of what’s out there provides a good checklist, but little provides a good framework that a strategy formulation effort can be based upon. Part IV will address a method for harmonizing this insight and provide a starting point.

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