Monthly Archives: May 2012

For Lasting Results, Follow the Procurement Leaders …

… but be sure to focus on the right characteristics first. Reviewing a recent summary of A.T. Kearney’s 2011 Assessment of Excellence in Procurement Study over on the A.T. Kearney site on why you should Follow the Procurement Leaders that described seven ways to lasting results, I couldn’t help but notice that they had all the right suggestions, but in reverse order. Starting from the bottom of the list, and working our way up, we see that the suggestions will transform your organization from an average performer to best in class.

  1. Win the “War for Talent”.
    This is the first T necessary for supply chain success and the most critical one. No supply chain function can be happen without someone in place to plan, manage, and execute it — and for any function to be planned, managed, and executed in an optimal manner, you need world-class talent.
  2. Adopt Technology.
    This is the second T necessary for supply chain success and the next most critical one. Once you have found the right talent to take your supply chain to the next level, you need to enable your talent with the right technology to make them as efficient and effective as possible.
  3. Transition to Category Strategies.
    As the article notes leading procurement organizations use more advanced toolkits — systematically employing more than twice as many methods as the followers — to tailor their approaches to each situation. That’s why leading e-Sourcing / e-Procurement providers are now offering platforms with category templates / workflow management capabilities to allow platform customization to each organizational category and support the third T of supply chain success.
  4. Use Supplier Relationship Management.
    Suppliers are key to supply chain success, and leaders manage the relationship to get the most out of it. They use suppliers to improve innovation and growth, monitor compliance and risk management, and improve capabilities across the supply chain.
  5. Manage Risk Systematically.
    Leaders use risk-impact analysis, financial risk management, and disaster planning as ways to protect against, and mitigate the effects, of disruptions — unlike the risk management “followers” that constitute 80% of companies that are a single natural disaster away from a major supply disruption.
  6. Contribute to Top and Bottom Lines.
    It’s not just about cost reduction, but about value generation. Good Supply Management doesn’t just stop at cost reduction, but goes onto demand reduction, component innovation, product innovation, and even market innovation. This is done by managing risks, managing supplier relations, applying category strategies, using technology, and using all of the skills your talent possesses.
  7. Align with the Business.
    Leading supply management organizations support the business strategy. And while this is the most important goal from the viewpoint of Supply Management, as the goal is to increase the image of Supply Management in the organization, this can not be accomplished until all of the pieces of the puzzle, described in the first six steps, are in place.

No Interface, No Delay?

Apparently, according to a recent article in Inbound Logistics that proclaimed All In One, a good reason for buying an integrated ERP / SCM solution is the fact that if the solutions are integrated, then there is no interface between two separate systems that could cause problems or delays. An interface is another piece of software that, like the ERP / SCM solution, could have its own set of issues. And it’s another piece of software that has to be maintained.

However, this applies to integrated systems as well. Most integrated systems are composed of multiple modules, each of which has their own interface. As a result, the no interface, no delay argument doesn’t have a lot of merit. If there’s a bug in the internal API, then there could be a system failure in the sole-source system just as easy as there could be a system failure in an interface or a third party system.

The proper rationale for selecting an integrated solution is because it:

  • has all of the key features that are required,
  • meets the needs of the organizations and the users,
  • and brings the right value to the organization.

You don’t select an integrated solution because it:

  • is cheaper,
  • minimizes the number of suppliers you need to interact with,
  • or minimizes interfaces.

It’s not about cost, it’s about value. It’s not about supplier count, but what the suppliers can bring to the table. And it’s definitely not about the number of interfaces, but about the stability of the interfaces and whether or not they enable access to the right data. The short story is that you can make arguments for and against either solution, but it all comes down to the merits of the solution with respect to your organizational needs, not a generic pro/con checklist.

What Impact Will the National Defense Authorization Act (NDAA) Have On Your Supply Chain?

According to a recent press release over on the IHS site, stringent new counterfeit-part regulations in the 2012 U.S. National Defense Authorization Act (NDAA) may have broad international implications that could impact hundreds of of overseas companies that supply Billions of dollars’ worth of items to the U.S. Government. This act, which was signed into the US law on December 31, 2011, not only authorized 662 Billion in funding “for the defense of the US and its interests abroad”, not only included Title X, Subtitle D on “Counter-Terrorism” which deal with the detention of persons the government suspects of involvement in terrorism, but also contains 8-page section 818 on the “detection and avoidance of counterfeit electronic parts” buried in its 565 pages.

This section states that the secretary of the department of defense shall issue or revise guidance … which … shall address requirements for training personnel, making sourcing decision, ensuring traceability of parts and shall revise … the Federal Acquisition Regulation to address the detection and avoidance of counterfeit electronic parts and The revised regulations … shall provide that … covered contractors who supply electronic parts or products that include electronic parts are responsible for detecting and avoiding the use or inclusion of counterfeit electronic parts or suspect counterfeit electronic parts in such products and for any rework or corrective action that may be required to remedy the use or inclusion of such parts.

In addition, the act states that the Secretary of Defense shall implement a program to enhance contractor detection and avoidance of counterfeit electronic parts and the program … shall require covered contractors that supply electronic parts or systems that contain electronic parts to establish policies and procedures to eliminate counterfeit electronic parts from the defense supply chain, which policies and procedures shall address

  1. the training of personnel
  2. the inspection and testing of electronic parts
  3. processes to abolish counterfeit parts proliferation
  4. mechanisms to enable traceability of parts
  5. use of trusted suppliers
  6. the reporting and quarantining of counterfeit electronic parts and suspect counterfeit electronic parts
  7. methodologies to identify suspect counterfeit parts and to rapidly determine if a suspect counterfeit parts is, in fact, counterfeit
  8. the design, operation, and maintenance of systems to detect and avoid counterfeit electronic parts and suspect counterfeit electronic parts, and
  9. the flow down of counterfeit avoidance and detection requirements to subcontractors

And many other requirements, along with punishments for offenses which an include 2 and 5 Million dollar fines for individuals and 5 Million and 15 Million dollar fines for corporations for first offenses with second offenses garnering fines of up to 30 Million dollars.

This is of grave concern, because the legislation applies not just to counterfeit parts, but suspect counterfeit parts. An organization that supplies parts that are suspected to be counterfeit, whether proven counterfeit or not, will have to remedy the situation on its own dime (which could cost Millions to mint), and if it doesn’t do so satisfactorily, could be fined Millions of dollars on suspicion. And given that the reports of counterfeit parts have soared dramatically in the last two years, with 1,363 separate verified counterfeit-part incidents in 2011 as compared to 324 in 2009, this is a serious concern for anyone supplying products to the US Government. Given that many of these counterfeit parts are commercial electronic components that have wide use across every major technology end market, this is an especially serious concern for suppliers and manufacturers in electronics supply chains.

It would appear that this puts the need for supply chain security and risk management in your electronics supply chain at an all time high, now that even suspected fraud can bankrupt your company. The impact of this legislation could be much worst than 10+2. What do you think?

What Finance Still Wants from Procurement, At Least According to the Survey

According to a recent survey conducted by CFO Research Services, as summarized in a recent post on How to Improve Procurement over on Procurement Leaders, finance leaders want procurement to increase its contribution in the following areas:

  • Working Capital Management
    especially since Procurement spends so much working capital
  • Supplier Collaboration Improvement
    especially since Procurement has the majority of the interaction with suppliers
  • Business Performance Risk Management
    as Procurement is supposed to be on the 8-ball when it comes to risk
  • New Market / Business Line Expansion
    as Procurement is already in foreign markets buying and probably has the most low-down

So what should you do? Start with the advice offered by the author:

  1. Initiate discussions with Finance on how Procurement can make the greatest contribution in their eyes.
    Remember, Procurement’s biggest problem in many organizations is still its image. In many organizations it’s still seen as the island of misfit toys, the ax men, or the one-trick cost-reduction pony. It doesn’t matter how much Procurement saves, how much it reduces organizational risk, or how much value it brings, if Procurement’s image doesn’t change, then all of its contributions are for naught.
  2. Develop a plan to embed the right analytical and financial skill sets in Procurement.
    Face it, success today depends on the ability to analyze data, extract information, and generate the knowledge that the organization needs to make the right decisions. This requires the right skill sets.
  3. Determine the right technology roadmap to support the strategy.
    This will be a two-part strategy. In the first part, the organization will implement a closed-loop e-Sourcing and e-Procurement / P2P solution to reduce tactical processing requirements and free up more time for strategic activity. In the second part, the organization will use appropriate analytical solutions and apply it’s new analytical skills to trying to find more opportunities to increase organizational value.

And then, finally, don’t forget to create an appropriate transition plan — remember, success depends on the 3 T’s — talent (with the right skills), technology (with the right functions), and transition (to the right operational structure).

A Great Guide to Enterprise Influence(rs)

Over on the Enterprise Irregulars, Paul Greenberg recently published part 1 of a 4-part series on how to deal with and think about influencers and the basics around building an influencer/analyst program that is a must read for any Marketer or PR Pro looking to get the attention of one or more influencers to cover their product or service. The post is great because it contains a number of key takeaways, including this key point that most non-PR Pro’s miss: Do Your Homework: understand who they are, not just what they are. That means learn something about them as actual human beings.

It’s amazing how many PR / Media Relations people don’t understand why they should do this. They think that if they just spam the same bullsh!t press release to three thousand e-mails, they will get results. I can tell you that, like the influencers named in the post, every day I get dozens of spam press releases that just get dumped to a spam folder that gets emptied, unread, once a month. Why? Well, not only do I not have time to read them all, and not only do I have no interest in hyped up carbon copy that doesn’t bother to tell me how the product or service will benefit my readers, but I have no interest in wading through paragraphs of hype to figure out if the product or service being hyped is even related to Supply Management. (Now that SI gets about 125,000 visits a month, it gets on spam lists for political and religious products too, for example.) But more importantly, the doctor not only dislikes vendor press releases, but despises requests to blog about or post a press release. SI is about solutions, not about hyperbole. And, if the PR / Media Relations person had taken 5 minutes to actually visit the site and read a few paragraphs of the FAQ, they’d know that. (Unlike many blogs or sites, just about everything a PR / Media person would want to know is in the FAQ!) Furthermore, while multiple press releases typically gets a sender on a spam blacklist, a request for demo is usually answered in an hour with “here’s how much notice I need and, in this timeframe some days I could fit you in”. But I digress.

The point is influencers are people … insanely busy people. While I typically don’t get the 30-50 requests for demos, interviews, and story pitches that Paul gets in a week, I can tell you that I typically get 20 – 25 requests for interviews or stories, with typically 20-24 of the form “Would you like to talk to X / Would you please cover Y quoted/referenced in the Press Release before”, and, these days, ignore all of them. On the other hand, the one that says “we have just released Product X that does A, B, and C for Purchasing/Procurement/Logistics/Supply professionals that we believe would be of benefit for your readers because you cover Z, would you like a demo/discussion” gets a response within 24 hours. Unless, of course, this sentence is expanded into two pages that compares the product to the holy grail, in which case I assume that the company, like the author, has way too much ego and, like Paul, shake my head in disbelief and relegate it to the bottom of the queue.

Now, I might not be front page WSJ (but, in our space, who is?), but if you are building Supply Management technology, can you really afford to kiss-off a niche site known for its coverage of supply chain technology that gets 1,500,000 visits a year? (To put this in perspective, based on a recent post, the Spend Matters family of blogs gets about 3,600,000 visits a year — or 900,000 visits per blog on average, with SpendMatters and MetalMiner getting the majority of visits.) Maybe you can, but since you don’t know where your next lead is going to come from, why should you? (Especially since a demo and subsequent coverage costs you nothing! And this holds true for many influencers in the space.)

Plus, as Paul points out, an influencer can impact

  • the purchasing decision of a prospect
  • the thinking of an entire industry
  • the mindshare that a company will have
    which indirectly influences the purchasing decisions of a prospect
  • institutional and individual investors

and can often do so with much more credibility than you can acting on behalf of your organization.

So where do you start?

  1. Figure out what kind of influencer is right for you — be it an institutional, boutique, independent, established, newly emerged, vendor, media, or influencer influencer. It will depend on the specifics of your product/service and the market you want to reach, and you should definitely read Paul’s post for insight on how to make the call, and, depending on what type of influencer is right for you, who some starting influencers are.
  2. Then, as we stated in the beginning, do your homework.
  3. Remember it’s the person, not the organization, that you are reaching out to.
  4. Say the right thing.
  5. And read Paul’s 4-part series for the details.