Daily Archives: November 10, 2010

Best Practices Must be Adapted for Maximum Benefit

In a recent article over on the Supply Chain Consultants site, Harpal Singh asks if best practices are always best. It’s a good question, because the answer is no, or at least not if you blindly follow the advice of your competitor.

While every company executes similar functions — HR, Legal, Marketing, Product/Service Development, and Supply Chain — every company has differences that make it distinct. As a result, no process or practice can be expected to work out of the box without some tailoring.

For example, company X’s cost saving strategy might be reducing the number of shipments by using the available storage space in buildings they own (and which would otherwise go unused) to achieve that goal while company Y’s cost saving strategy might be JIT shipments because they don’t own any storage space and rental costs in local warehouses are quite high. As a result, while both might be standardizing on the same inventory management system to achieve inventory improvements, the systems would have to be configured differently.

Similar scenarios can be imaging in supplier selection (depending upon the desired characteristics of the supplier), carrier selection, and joint product development. While there will be lots of similarities (as both should be using e-Sourcing, e-Procurement, modern web-based IMS/WMS applications, etc.), there will be lots of differences in the nuances of the implementation. However, that does not mean that you can sweep someone else’s best practices under the rug, because if they come from a big, successful, global corporation like Apple, GE, Sony, P&G, or Unilever, there’s a lot of meat on the bone and you just have to figure out how to get the right cut.

For more tips on how to make best practices work for you, check out Harpal Sing’s article.

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Procurement – Why we really matter!

Today’s guest post is from David Furth, VP of Marketing at Hiperos. David has been in Procurement for over 20 years and has held senior positions at Perfect Commerce, BasWare, RightWorks/i2, and Deloitte Consulting.

Procurement is on the verge of experiencing its next major transformation. During the past ten years, the emphasis has been on optimization – leveraging spend, improving the sourcing process, and becoming more efficient across all aspects of the P2P and Order-to-Cash value stream.

As a result of these improvements, companies now rely on suppliers, outsourcers, and other third parties more than ever. A fact now recognized by C-level executives, boards of directors, and regulators, alike. Why? The increased reliance on these third parties has occurred without implementing the same level of control or having the same level of visibility that was in place when the work was being performed internally. The result is increased risk to company performance and brand reputation.

As a result, forward-looking procurement leaders are transforming their organizations. They still maintain the same obligation to keep costs down. But they have added the responsibility to continuously assess risk, pre- and post-award, and introduce integrated processes and controls across their companies to mitigate that risk by working closely with other functional areas, business lines, and geographies. During the next few years, procurement will be looked upon to provide important guidance around how key external contributors to their companies’ value chains are managed.

This is why more and more procurement executives are stepping forward to introduce a consistent method for managing providers across a wider breadth of their extended enterprise. These executives recognize that just because the contract assigns responsibility/liability for just about “everything”, this does not absolve their companies from the responsibility of ensuring each provider is living up to all contractual obligations. This requires implementing management control programs that actively monitor both performance and compliance to help ensure suppliers are meeting all their obligations.

This is an enormous responsibility that requires consolidating requirements across a large number of stakeholders, communicating expectations to all providers, collecting information and documentation about current status, and collaborating with providers to remedy issues when shortfalls are identified.To be successful requires a new attitude, a thoughtful approach, buy-in from key stakeholders, and the appropriate technology. Despite the best of efforts, responsibility or risk cannot entirely be outsourced.

So, when you consider the consequences of suppliers failing to meet their obligations, regulators handing out fines for poor oversight of third parties, and investors losing confidence in your brand, it is not surprising to see real action taking place. The past few years have made it abundantly clear, it is not a good strategy to expect that a great contract will get you great results, ensure providers follow the law, or prevent them from acting unethically. Therefore, it is imperative to have the appropriate level of controls to mitigate to the appropriate level of risk. This has not been the traditional way of thinking, but that is rapidly changing.

Thanks, David.

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