Monthly Archives: June 2011

Are you Really Focussed On Value? (Key NPX Take Away 1)

Last week I attended The Mpower Group‘s Next Practices Xchange which is a gathering of some of the top supply management personnel from a select group of Fortune 500 companies who met to discuss how to get to the next level of supply management. Realizing that today’s best is not enough to sustain value in an increasingly competitive and economically challenging global marketplace, the best of the best are already trying to figure out how they are going to maintain their edge in tomorrow’s supply chain landsape. It’s a hard question that is not getting enough attention (as per my recent posts on Next Generation Sourcing and Supply Management), but there are answers to be found for those willing to look hard enough. This series will address some of the questions that a Supply Management organization needs to address to get to the next level, as well as providing some starting points for those looking for answers.

Whether you call it Next Level Supply Management, Next Generation Supply Management, or simply Next Practice, the key commonality to advancing the supply management function is moving from a cost focus (even if it is TCO) to value. However, before one can get to value, one has to understand what value is. Lamar Chesney, CPO of SunTrust, had a great presentation on value perspectives and how our view of value is rarely their view of value and how we fail to realize the value that is available in a Supply Management initiative because of this.

For example, while everyone may agree that price reduction is value, our view of value is generally not their view of value.

When we focus on What they really want is
cost avoidance speed to realization
TCO sense of comfort
specificity of deliverables practical certainties
contract certainties and flexibilities feeling of specialness
risk mitigation and governance contributions beyond sourcing & SRM

And, more over, this is how a Supply Management organization often responds to their view of value (even if the Supply Management organization does not realize it is doing it):

What they want What we believe
speed to realization speed kills
sense of comfort a good contract trumps the soft stuff
practical certainties a good contract, which can take months to negotiate, insures you get what you want
feeling of specialness everyone knows the supplier is providing a commodity and there’s nothing special about the product or service
contributions beyond sourcing & SRM sourcing strategies, contract management, category management, SRM, etc substitutes nicely for my help with your business strategy

See the problem? Not only does the (internal) customer rarely want what Supply Management wants to deliver, but the messages that Supply Management sends scares the internal customer away because the core message the internal customer hears is that what you value doesn’t matter. Not a good foundation for building the cross-functional team necessary for generating value.

Are You a Contract Hypocrite?

Tim Cummins penned a great article for the newly relaunched Negotiator Magazine site on how “Hypocrisy in Contracting Leads to Wasted Negotiation” since ridiculous demands just lead to repetitive, predictable negotiations that bring little or no value to either party. And this happens more often than not since most large companies would never sign their own contracts, which are diametrically different from those they demand when buying, which is just ridiculous.

Not only do we have to ask what happened to our ethics (that most professional associations insist upon), but we have to ask why we are risking failure for the sake of assigning blame should things go wrong instead of working together to insure that failure never happens. Especially when research is demonstrating that creativity and innovation are closely linked with greater mutuality in key terms which creates a joint responsibility to ensure success.

It’s not hard to harmonize buy-side and sell-side contracts, and it’s not hard to put together a contract you’d actually sign with fair, bi-lateral terms and conditions that share risks and rewards and protect both parties. (the doctor is just an engineer, his paper works that way, and he didn’t need an arrogant overpriced lawyer to create it — in fact, he didn’t need a lawyer at all!) So why can’t we move forward on this issue?

What Should You Do When Your Firm is About to Undergo an M&A?

M&A activity is heating up, and there’s a chance that your firm could be next. You could be the acquirer, the acquiree, or an equal partner in what is designed to be an equal merger. Either way, you have two choices: embrace the merger / acquisition or pretend it isn’t happening. In the first case, an enteprising Supply Management professional can often land herself a better position in the merged organization if she finds a way to shine. In the second, the disbelieving individual is likely to find himself out of a job in short order.

So what should the enterprising individual do if she wants to make the most of the situation? A recent article over on SupplyManagement.com (from the Official CIPS Magazine), about how such an individual gets “in the mix”, provided some useful insights. According to the article, the individual should:

  • seek out colleagues in the other organization
    and work with them on analysis, contract review, and benchmarking to identify quick wins that will raise her profile
  • understand the other business’ systems and processes
    as there may be scope for re-engineering that will increase efficiency, decrease cost, and improve results
  • look for complementary strengths
    that complement her organization’s weaknesses and use them to attack sourcing projects that would be put off otherwise
  • identify those who feel challenged or threatened
    and work to help them — as they’ll likely remember her when asked who should stay and who should go

and should not:

  • go into avoidance mode and hope it will go away

because, once Procurement is involved, it rarely does.

It’s good advice, and a good article.

Apprenticeship is the Answer

Back in March when I asked if we can fix supply chain education because academic programs, third-party programs, private programs, and vendor programs are, for the most part, not meeting our needs, I pointed out that the answer was to go back in time to when apprenticeshipos were common. When students studied on the job under the guidance of a master who prepared them for the job they had to do, not to advance an understanding of purely intellectual pursuits devoid of a real world application.

While I didn’t get much of a public reaction, I did get some very positive feedback from some old-school folks who have tried everything and realized that work-alongside training is the best answer. But a few old coots, as brilliant as they may be, do not deliver enough critical mass to get the idea out there. However, it seems that India is proving my point. As per this recent article over on Global Services that asks if “everything we know about offshoring innovation is wrong”, not only does an appropriately designed test prove to be a better indication of ability than a University degree, but intensive on-the-job training under a skilled expert tends to produce a better worker in months than is typically produced by years of higher education.

In other words, apprenticeships are the answer.