Monthly Archives: February 2012

Any Blogger Can Benefit Your Brand — But It Takes a Great Blogger to Benefit an Organization!

Late last year, Apparel ran a good article on How Bloggers’ Influence Can Benefit Fashion Brands that is worth a read by all Supply Management Professionals because blogs can be used to influence more than just consumer trends in brand preference. They can be used to influence trends in technology, transition, and even talent management — the three T’s of the modern Supply Management organization. How? We’ll get back to this — first we’ll discuss the article.

The article notes that leading creators and distributor of fashion are working with bloggers big and small in both traditional media (TV, Radio, etc.) and new media to get their brands out there. Why? Because, despite the rumblings that “blogs are dead” now that we have the Twitter-Generation who believe that conversations can happen in 140 characters (and to whom I respond ha ha ha Ha ha, ha ha ha Ha ha, ha ha ha Ha ha, heh-heh-heh-heh-heh-heh-heh-heh-heh), they are doing better than ever. The links have shrunk (thanks to temporary link shortening services), the virtual access locations have changed (as many people read them in a central online access point like Google Reader or their own RSS feed manager), and the promotion strategies have shifted (from SEO and sites like Digg to Facebook, LinkedIn, and Twitter promotion), but blogs are stronger than ever. Established authorities are read day-in and day-out and draw a more regular audience than some newspaper columnists as more and more people go on-line for their daily dose of content. Plus, since bloggers have more freedom to choose whom they do and do not work with, and what they do and do not promote, than advertisers, readers can trust that the blogger is promoting his or her opinions and not that of the company (unless the two happen to sync up).

And the proof that blogging is mainstream is in the pudding — if there are agencies that can make a profit simply through the promotion and management of independent bloggers, willing to work with companies and brands they identify with, that shows the acceptance of the medium. No one stays in business supporting a medium that isn’t supported. And since more of these firms are popping up, it’s obvious that blogging is mainstream — even if it isn’t on Facebook.

But the real point is that many people trust independent blogs for advice more than they trust mainstream media, which needs to be heavily supported by advertisers to stay in business, and, in essence, often needs to promote some of those views and products whether or not the media outlet personally supports or identifies with the views and products it is promoting. This is what gives blogs power of influence, and that power of influence is not limited to brand. It extends to technology, transition, talent management, and other forms of thought leadership. An idea astutely put forward on a blog can often take hold faster than an idea put forward by a vendor who obviously wants to promote a product or service. And that’s why organizations need to work with great bloggers to advance the level of practice in their industry. Unless the blogger can put forward the idea in a clear, well-thought out, and defended manner, the message will be lost and the organization will be better off focussing on brand (and sales) than thought leadership.

But fortunately for Supply Management organizations, product, and service providers, there are a number of great bloggers in this space. And if these organizations are as great as the bloggers, they will learn to make better use of them both as outlets for best practices and inlets for thought leadership in their organization.

That’s my virtual 2 cents. Any differing opinions?

Want Supply Management Pros? Avoid the Culture Clash!

Chief Executive recently ran a good, but short, article on Talent retention that said More than Money: Culture is the Key to Employee Retention that is worth a read by every Supply Management Director looking to recruit and retain talent, which, due to a lack of talent development programs, is in short supply at many Supply Management organizations.

Noting that in this economy, however, companies can’t afford increased salaries and lots of perks for employees, the article also notes that, however, that though employees do care about how much they’re making, there are many other things that you can do to keep employees engaged and motivated, which includes corporate culture.

Quoting a USA Today article that covered GreatPlaceToWork.com‘s list of the 25 best multinational workplaces, the article noted that companies with exceptional workplaces have three things in common:

  • employee trust in management
  • pride in the company
  • camaraderie with colleagues

This is because everyone wants a positive work environment. The article points out the obvious when it notes that you should treat your employees with respect, and that employees who have pride in what they do can make up for other organizational shortcomings, and misses the obvious that employees want to feel empowered, want to feel like they are contributing, and want to look forward to getting up and going to work in the morning. This requires all three of the elements of culture outlined above, and, in the doctor‘s view, also requires

  • employee accomplishment

A dedicated professional wants to feel, at the end of the day, that he or she accomplished something and made a difference. This is why your talent must be trusted by management to work on meaningful tasks, empowered to do so, given the support they need to succeed, a peer group that has common goals, recognition of their results, and pride in their work. Hit these nails on the head and your chances of recruiting and retaining top talent go up a notch or three.

Can Cost Management On Its Own Be Strategic?

A recent issue of eSide Supply Management published a piece on Strategic Cost Management and the Supply Base that, while full of good advice, might be misleading to an up-and-coming Supply Management practitioner who needs to be set on the right road early on. However, before I can explain, let’s review the key points from the article.

The article started off great when the author noted that:

      It might sound obvious, but when faced with a cost improvement challenge from your business, a good place to start is to think about what you’re practically being asked to do. Does the scope of the request apply to an innovative product or service whereby you more likely need to achieve an optimized cost, while simultaneously trading off against other attributes such as performance, delivery channel or customer appeal? Or, is the focus on a current product or service which is no longer deemed competitive or requires maintenance of a current selling price via cost reduction efforts.

The reality is that cost management is not simply keeping prices down. It’s keeping total cost down — where total cost is the total lifecycle cost of the product, which includes acquisition, manufacturing, distribution, sale, warranty, return, and disposal — while keeping total value up — which includes quantitative factors such as low defect rates and high reliability and qualitative factors such as market appeal and differentiation. And the best way to achieve this goal will be different for every product.

And the goal will always be cost, and not price, reduction, because cost reduction is typically sustainable over the long term, while price reduction is often a short-term commercial concession, which is then typically reversed later when the power balance in the buyer/supplier dynamic changes.

However, cost reduction is a more difficult task, especially when the suppliers have power, but there are tools available to help the buyer. The author does a good job of pointing out some of them, including:

  • analytics and benchmarking
    which can provide a buyer with a detailed cost breakdown and a foundation for an accurate cost (of production and distribution) model — which helps the buyer understand how much it should be costing the supplier and what level of profit margin the supplier is trying to get
  • integrated product teams
    whose collective understanding of the product or service from a production, distribution, use, and repair and recovery perspective can shed insight on potential opportunities for cost reduction that a supply manager may not see on his own
  • supplier involvement (from a technical perspective)
    a good supplier is full of innovative ideas to provide your organization with more value (and keep you as a customer) — especially if you bypass sales and go straight to the product engineers or service professionals (as they know where the cost is)

But even though this will help with the multifaceted, complex and often perplexing arena of supplier cost management that supply management professionals have to deal with on a daily basis, it kind of misses the full picture — that cost is only one component of strategic supply management and if supply is strategically managed, cost will fall in line as the buyer will know what costs need to be managed and what costs (of little consequence) can, more-or-less, be ignored.

After all, it’s usually not the initial price that constitutes most of the cost, but the unexpected expedited deliveries, the unexpected high rate of failure and warranty returns, the cost of unhappy customer retention, the losses associated with inventory stock-outs because the supplier couldn’t deliver on time at all (even with expedited deliveries) that constitute most of the unnecessary cost in a category. Control the supply, control the cost.

Thoughts?

The Case for Onshoring … Is A Damn Good One!

Upon a closer look, offshoring is not always the right answer for all products, especially those sold in America. For one thing, labor costs in general are shrinking as a share of the total cost for many items. Moreover, average factory wages in many developing countries are rising, as is the demand for America’s sophisticated just-in-time, cost-saving, logistical systems. When common shipping problems are added into the mix — natural disasters, security threats, political instability, theft and other risks — more manufacturers are concluding that the savings offshoring had promised are just not there.
  Guy Morgan, BBK Managing Director
  from The Case for Onshoring

You’d almost think he was trying to get in the doctor‘s good book! Truer words could not be spoken and I could not have said it better myself.

And these words are true whether you are talking manufacturing, software development, back-office functions, or call-centre outsourcing. We’ll review some high points of the article and then discuss these other points.

I think the author is right when he quotes Harry Moser, retired chairman emeritus of GF AgieCharmiles, who argued that many companies began moving production to low-cost countries mainly because they thought everyone else was. The worried that a competitor might gain a cost advantage; and, in the process, they put a limit on their thinking by fixating on a component’s sticker price rather than considering its total cost. But this leads to problems, especially since as per a 2009 analysis by Archstone Consulting and Duke University, most manufacturers use “rudimentary total cost models” that ignore 20% of the offshoring’s cost. And when you add to this the fact that the prices for Asian manufactured products have risen 15% to 20% in the past 4 years, there aren’t that many cost advantages.

And then, as the author astutely points out, you need to factor in excess inventory to replace poor-quality products and insure against late shipments, stolen intellectual property, rising fuel costs, environmental impact and more … which all adds up to more cost!

Add it all up, and it’s often cheaper to produce your product in North America. And this is sometimes the case even if you have to produce it in or near a major city that you would normally consider to be a high-cost locale!

It is time for the home-shoring renaissance that the doctor has been predicting since 2007 (which is well before the Boston Consulting Group figured it out, as mentioned in the article, but we’ll forgive them because they’re still ahead of the curve). What everyone is forgetting is that, despite higher labour costs, good ol’ (North) American ingenuity and innovation always leads to much higher rates of productivity and lower component costs in the end that always more than cancel out the labour costs. The proclamation that some U.S. states will become among the most cost-effective locations for manufacturing in the developed world is a correct one and it will happen. The only question is will your organization be one of the few who will lead the way and reap the greatest rewards?

And if you want to get an idea of how big those cost savings associated with onshoring could be and you’re in manufacturing, checkout the FREE TCO Estimator associated with the Reshoring Initiative over on ReshoreNow.org. It’s not perfect, but with 29 cost factors, it’s a good start.

As for the other industries I mentioned, you’ll save money bringing those back as well.

If your software development is outsourced to India, there are big savings to be had. Labour costs are still rising and the average skilled worker now costs (at least) 40% as much as his American counterpart. You might say that he’s still cheaper even after communication, remote management, and reduced productivity costs are factored in, but, if it’s innovative development, he’s not — especially if you reshore to Canada. Up here, we have the Scientific Research & Educational Development tax credit which can refund you up to 75% of approved research and development costs. And if you need money up front, it can always be stacked with the National Research Council’s Industrial Research Assistance Program. And since, up here, a software development resource costs at most twice as much as a resource in India, after these programs are applied, our world-class developers, who speak your language in your time zone and understand your business, cost half as much.

With respect to back-office functions and call-centres, there are a large number of small, rural, towns with low costs of living that would thrive off your operation and staff it at very affordable rates. And while the North American minimum wage might be three or four times as much as a prevailing wage for an English speaking call center or back office resource in Asia, when you consider that many calls will be resolved significantly faster as both parties will understand, and be comfortable, with each other from the first “hello” (as many North Americans aren’t comfortable with Asian call-centre support and have problems understanding their accent), the higher labour cost is negated with higher productivity. Plus, and this is key, no long-distance costs, no remote infrastructure costs, and significantly lower training costs (with much lower turnover). Win, win, win.

Bring the work back home. Unless you’re a Fortune 500 (like Apple) with demand for your product so big that it has to be made in a city (like Foxconn), and in the top 0.01%, it will be more cost effective to do so. And the higher quality and lower risk will make it all worth while.