Editor’s Note: Today’s post is from Dick Locke, Sourcing Innovation’s resident expert on International Sourcing and Procurement. (His previous guest posts are still archived.)
Indranil Mukherjee / AFP-Getty Images from MSNBC Photoblog
Best reader comment: “Sh@#$% ! My Porsche was in that container, I suppose I’m not going to get it by Friday “
Full story on MSNBC.
Fortunately for the environment and the supply chain, this doesn’t happen often.
As if you didn’t have enough risks to worry about, now, as per this recent article in Industry Week on Climate Change Risk Management, you now have a new risk to worry about. If you don’t anticipate extreme weather events that can cause sudden and material damage to business assets, interrupt business operations directly, or disrupt key elements in transportation or support activities, then you might be sued by your investors for losses from your failure to disclose and anticipate those risks, just like American Electric Power Company was sued by the state of Connecticut.
Right now most of these claims are limited to “public nuisance” claims based on GHG emissions (which, according to various plaintiffs, have contributed to events like Hurricane Katrina), but they could be brought under security laws in the near future, now that the SEC has issued interpretative guidance for publicly traded companies related to climate change disclosure. Any company that fails to disclose in accordance with the guidance could be on shaky ground, especially now that shareholders’ resolutions for disclosure of management’s responses to climate change are becoming much more frequent in proxy statements.
In other words, if you’re not identifying all your risks, disclosing all your significant risks, and preparing to mitigate those risks, you’re not only on the fast track to major disruption and loss, but lawsuits that drag on forever.
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A recent article in the Harvard Business Review outlined seven questions to ask to find out if you are ready for a rebound. What I found enticing about the article is that these seven questions have supply chain corollaries. If you can’t answer yes to these seven questions, chances are that your supply chain will not be ready for the decade ahead.
- Do You Take Advantage of Opportunities Others Miss?
Many companies continue to miss market and technology shifts that their rivals exploit. If you’re in this camp, you’re going to fall behind your competitors as they adopt better practices, better technologies, better suppliers, and better transportation options. For example, this means that you should have adopted real spend analysis and strategic sourcing decision optimization by now, as these are the only two sourcing technologies proven to repeatedly deliver double digit savings time and time again (at an average of 11% for spend analysis and 12% for decision optimization).
- Are Your Hydraulics Oiled and Flowing Smoothly?
As per the HBR article, organizational hydraulics are the mechanisms that senior executives use to translate corporate objectives into aligned action by individuals across the organization. If there are too many initiatives, priorities, or conflicting goals, then the hydraulics get overburdened and break down. Limit your goals to 2 or 3 and initiatives to the top 4 or 5 opportunities and excel in the execution of those initiatives most likely to deliver the desired results. For example, if your sourcing team is limited, do a spend analysis and identify the top 5 categories with the greatest savings opportunities and those are your priorities for the quarter. Everything else can wait. It’s better to save 10% off of 100M than 20% off of 10M.
- Does Your Organization Reward Excellence?
Or does it reward mediocrity and call it teamwork? Organizations should not only reward individuals who do what they say the will and meet, or exceed, their (stretch) goals with outsized bonuses, but remove compensation caps. If your top sales person or top buyer ends up taking home more than the CEO, that’s a good thing! It generally means that he sold (tens of) millions worth of product or services or she saved (tens of) millions of dollars for the organization. And if you’ve hired a smart CEO, and given her a piece of the company, she’ll be grinning from ear to ear as the value of her stock soars as a good CEO is in it for the long term.
- Are Your Core Values Aligned to Success?
Or are they a joke? If your organization looks up to a bullcrap mission statement like “we synergize our processes to bring value to our customers”, then your values are probably a joke. But, on the other hand, if you focus on achievement, ownership, teamwork, creativity, and integrity … then you’ve got the framework for building a truly world class supply chain organization.
- Are You Talking About the Right Things?
Or focussing on irrelevant minutia because you don’t have the guts to take on the elephant in the room that is the real impediment to your progress. If you spend your days looking for the next fire to put out instead of addressing how you’re going to weather the market storm that’s brewing, you’re talking about the wrong things and will be battered badly when the storm hits. Optimality in the supply chain is fleeting — even if you’re lucky enough to obtain it, it will quickly fade. The organization must always be on the lookout for the next process or technology that will increase efficiency and stability.
- Are Your Warriors Still Fighting?
Or have your Vikings become farmers? If your team spends their time tweaking the last initiative until they’ve eeked out every last fraction of a percent of the perceived savings opportunity instead of diving into new opportunities as soon as they’ve extracted 80% of the potential value of the current opportunity, then your team has transitioned into a community of farmers content to live a peaceful and stable life. From an organizational viewpoint, this is bad since fields can be wiped out by a single flood and the only way to sustain success is to keep going after the next big opportunity. Furthermore, since it will generally take four times as much work to eek out the last 10% to 20% of savings, it’s just not a good investment of your team’s time. Follow the 80/20 rule if you want to maintain success.
- Are Your People Self-Sufficient?
Or does everything come to a stand still every time you spend a few extra minutes in the lavatory? As the article says, senior executives who dash from crisis to crisis are a sign of organizational weakness, not leadership strength. If your team is truly strong, they will be able to function without your leadership and solve crisis on their own. You should be able to disappear for a month without any adverse effects to the organization. A good leader focusses on building the team, providing them with the support they need, and preparing them for future advancement — she doesn’t solve their problems for them. She gives them the training and support they need to solve their own problems
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