Monthly Archives: April 2011

The Voice of the Customer

As mentioned in yesterday’s post on What Can The Right Supply Chain Transformation Do For You, there are a number of best practices that should be followed when undertaking a supply chain transformation but by far the most important is to listen to the voice of the customer. Since the whole purpose of the supply chain is to serve the company and the whole purpose of the company is to serve the customer, the best supply chain is one that serves the needs of the customer from end to end and enables the company to excel in the products and services it provides.

Even when considering manufacturing, service, and raw material suppliers, the voice of the customer has a hand to play. The voice of the customer has a role to play at each stage of the supply chain mega process. Whether you are Planning, Buying, Making, Moving, Storing, Selling, or handling a Return — the customer’s needs must be considered. The following are just a few of the questions that can be asked at each stage:

Stage Question
Plan What needs does the customer have?
What products or services might meet these needs?
Which of these do we have the competence to offer?
Buy What materials or services do we need to offer the products or services we plan to offer?
What level of quality is the customer expecting?
How robust do the materials or services need to be?
Make What features are most important to the customer?
What level of quality is required?
What materials should be avoided because they might be hazardous?
Move How fast does the customer need the product?
How environmentally concerned is the customer?
Are there any special transportation requirements required to insure the product arrives to the customer as expected?
Store Where should we place the product to get it to the customer when they need it?
What are the storage requirements to maintain quality and integrity?
Sell What price point is the customer expecting?
Where does the customer expect to buy the product?
Return If something goes wrong, how does the customer expect to accomplish a return?
Where does the customer expect to make a return?
How efficient does the customer expect the return to be?

If you answer these questions correctly, then you just might have a customer who says:

  1. I need a solution.
  2. I know where I can get it.
  3. I buy from you.
  4. My order goes “in production”.
  5. My order is then put “in transit”.
  6. I get and use the product.
  7. I get support when I need it.

And that’s a successfully transformed supply chain.

What Can The Right Supply Chain Transformation Do For You?

There’s a two-fold reason one of the top themes for SI this year is Next Generation Sourcing and a reason SI has spent posts (upon posts) discussing CAPS Value Focussed Supply, Tompkins Associates’ Supply Chain Value Creation Framework, BravoSolution’s High Definition Sourcing, Purchasing Practice’s Innovation Framework, The MPower Group’s Next Practices, and, shortly, Greybeard Advisors’ Next Level Supply Management. Not only is your supply chain not likely to survive the prolonged global economic recession and “jobless recovery” without it, but it’s going to mean the difference between survival and smashing success.

As proof, I point you to The Lessons from Dell’s Supply Chain Transformation, a recent videocast and article over on Supply Chain Digest.

While Dell’s investor relations group edited out some of the more detailed metrics that resulted from their recent supply chain transformation, the ones that stayed were extremely compelling.

  • 300% reduction in forecast error
  • 30% freight cost reduction
  • 30% manufacturing cost reduction
  • 37% improvement in product availability
  • 33% improvement in order delivery times

That’s more-or-less a 30% improvement across the board! All you have to do is implement best practices and, most importantly, listen to the voice of the customer at each stage. (And yes, it’s often easier said than done, but those returns are worth the effort.)

Common Negotiation Ploys: Some Basic Counter-Tactics

In Common Negotiation Ploys, we discussed that while while your goal as a procurement and contract professional is to get the best deal you can, the sales people at each and every vendor that you deal with have the same goal. And while you’re splitting your time between determining internal customer requirements, writing RFXs, negotiating contracts, managing contracts, and educating and managing your internal customers, your sales counterparts get 100% of their time dedicated to sales — and they’re spending all of that time trying to figure out ways to get more money from you.

We also discussed how your average sales professional has a dozen ploys ready to go before they even contact their first customer, (because they get weeks of training before they’re let out into the field while you get a 2-hour crash course in negotiations, if you’re lucky) and defined 16 common ploys that a salesperson might use to take you for a ride.

Today we’re going to discuss three of these tactics, how you spot them, and some basic counter-tactics you can use to stop them dead in their tracks.

Surprise!

The vendor calls you up and says they’re in your neighbourhood and can meet now or just shows up at the reception desk. The goal is to catch you off-guard and unprepared so they can soften you up for another ploy down the road.

This ploy is easy to spot even in the early stages when the vendor makes a point of only calling at lunch or at the end of the day when you are most likely to be at your desk and not in a meeting or, even worse, just shows up at your office.

Countering is easy. Don’t take calls at lunch or at quitting time unless it is from a known number and its important that you take the call. If the vendor representative calls and says they’re in town, thank them for the offer but explain that you’re too busy to meet now, and if they show up unannounced, explain that you can’t meet today because of other commitments (and if reception escorts them to your office, have security escort them back to the door if need be).

Bracketing

The vendor tries to determine what you want to pay and what you’re willing to pay in an effort to work you to the top of the “acceptable” range.

This is a little harder to spot because a good salesperson will never come out and ask what you’re willing to pay, but, over time, and many conversations, will ask innacuous questions that will allow them to create a range. For example, they’ll say “I bet the competition doesn’t charge any less than ABC” and then at a later time say “I could provide a high quality service for XYZ“, ABC << XYZ and if you didn’t refute the ABC, they know they can charge at least that, and if you didn’t tell them to outright jump off a pier at XYZ, they have a starting range.

The counter-tactic is to respond in non-committal and uninformative ways. “I’m not sure what my customer is paying now.” Or “I don’t know what this other vendor charges or if I could release that information“. Or “I’d have to check into that“. Or respond with a question of your own by asking if they could meet a considerably lower price.

Misdirection

The vendor attempts to misdirect you, your line of questioning, or attention away from a shortcoming or issue so that you only hear what the vendor wants to say.

Unless the misdirection takes the form of silence in response to your question, this can be very hard to sport because it can take the form of misleading statements, incomplete facts, or a number of other tricks innocuously injected into the conversation to lead you away from a dirty little secret the vendor doesn’t want you to know.

Your only chance to identify this is to look for verbal cues such as “this is only our test environment“, “that’s going to be in our next version“, or “I’ll get back to you” and your only chance to counter it is to dive deep on critical topics with counter questions such as “what do these numbers mean“, “how many users can this type of environment support“, or “what’s the defect rate of this part in production” and ask again and again until you get a clear answer to the question you’re looking for. If you can’t, and your gut says the vendor can’t deliver, your gut is, in all likelihood, right.

These are just the tip of the iceberg. For a deeper discussion of these ploys and their counter-tactics, as well as thirteen other ploys that an unscrupulous vendor representative might try to use on you, I’d recommend picking up a copy of Stephen Guth’s Contract Negotiation Handbook — it’s an eye-opener!

Do You Really Think It’s A Good Idea To Have Your Head In The Clouds?

eWeek.com recently published an article on how many data centers [are] unprepared for disasters that’s downright frightening. According to the recent AFCOM “State of the Data Center” survey that polled 358 data center managers from around the world,

  • more than 15% of respondents said their data center had no plan for backup and recovery,
  • 50% of respondents have no plan to replace damaged equipment after a disaster,
  • 65% have no plan to deal with cyber criminals!

Well sufferin’ cats!

This says that if you outsource your data center management, you have a:

  • 15% (1 in 7) chance of losing your data
  • 50% (1 in 2) chance of being down for an extended amount of time after a natural disaster
  • 65% (13 in 20) chance of getting screwed if you’re targetted for cyber crime.

Do you really like those odds?

Brazil is About to Get a Lot More Popular

China might be the tiger, but Brazil was pegged to be the tortoise of the decade. (Remember, slow and steady wins the race!) After all, in last year’s special report on business and finance in Brazil in the Economist, Brazil was pegged for 4-5% year over year growth, while most countries, like the US, are struggling to achieve a mere 3%.

The article, which noted that Brazil could be one of the world’s five biggest economies by mid-century, joining China and India who are also climbing, pointed out that FDI (Foreign Direct Investment) in Brazil was up 30% year-over-year when the global average was -14% and GDP has been outpacing inflation in Brazil for five years.

And now, as per this recent article over on CNet, Foxconn is looking to invest 12 Billion in Brazil. That’s almost 1% of the annual GDP of Brazil! That’s quite a boost to the local manufacturing economy. Then when you add the proximity to North America, the deep cuts in taxes Brazil is granting to foreign companies, and the rapid growth projected for the coming years, Brazil is likely to get a lot more popular in the years ahead.