Daily Archives: October 19, 2012

Federalist No. 18

In Federalist No. 18, Hamilton and Madison team up to address the ongoing issue of the insufficiency of the present confederation to preserve the union.

One of the key takeaways from this essay is summed up in these words a weak government, when not at war, is ever agitated by internal dissentions, so those never fail to bring on fresh calamities from abroad. As proof of the pudding they offer, they recount a history of Greece and how the relatively weak union they formed eventually broke down as rival city states went to war. Had Greece … been united by a stricter confederation, and perservered in her union, she would have never have worn the chains of Macedon, and might have proved a barrier to the vast projects of Rome.

The majority of the essay is spent recounting the histories of the Grecian republics, and the battle between Athens and Sparta and the Achaean league in particular, because it teaches more than one lesson. It emphatically illustrates the tendency of federal bodies rather to anarchy among the members, than to tyranny in the head. As a result, there should be little concern about the Union trying to abuse the power it is given. The essay is a good read, and a great refresher on some of the finer points of historical inquiry, but if you’re in a hurry you can skip the history lesson and get right to the takeaway – a strong Union is always better than a weak confederacy.

Are You Ready for the 4th Quarter Crunch?

Even though businesses can choose their own fiscal years, many choose to coordinate with the calendar year. As a result, the 4th quarter is now upon them, and, in any company that is not best in class, a lot of people are getting anxious about meeting their numbers. It happens every year, and even if I’m not oot and aboot (NSFW*), I see it indirectly every year in the 4th quarter slump (when blog stats take a temporary dive).

And this year, many supply management professionals have good reason to be worried. While the economy has started on the road to recovery, the road is full of potholes and, with the impending U.S. election, we don’t know what’s going to happen and whether or not the U.S. Congress that is elected on November 6 is going to vote to raise the debt ceiling or take the U.S. over the fiscal cliff. Given the lack of sound economic and global trade policy since Clinton left office, it’s hard to say what’s going to happen.

The issues is that many of these professionals did’t plan for the rapid increase in some commodity cost categories, talked about risk but never took mitigating actions, and didn’t take the time to upgrade their skills so that they could continue to do more with less (as we all know that even though many companies are spewing the talent talk, they aren’t engaging in the talent walk [and will be surprised when the market eventually rebounds and their top talent walks out the door, but that will be another post]).

But the year’s not over yet, and there’s still things they can do to not only mitigate the “damage” that is expected as year-over-year spend increases, but contain costs and demonstrate their ability to add more value to the organization before the year is up.

Three things in particular that they can do right away are:

  • Have Finance Agree to Better Cost Savings and Avoidance Metrics
    As discussed in yesterday’s post, savings on categories negotiated this year should factor in (index & formula based) commodity rate increases and exchange rate fluctuations and cost increases on spot-buys should be calculated using similar year-over-year comparisons. This way, even if the Sourcing team couldn’t get to as many categories as they’d like, and savings were less than anticipated, a better, more realistic, picture is painted.
  • Start Monitoring Contracts and Supplier Performance more Actively
    Has the supplier been billing at contract rates, honouring discount levels, and shipping on time with an acceptable defect rate? If the supplier is over-billing, if discounts are missed, and if shipments have to be constantly expedited at higher costs, the savings that were negotiated evaporate rapidly. Increasing the rate of savings capture across all high-spend categories will go a long way to meeting targets.
  • Take some online / distance training that can be done after hours
    Increase your skills, increase your efficiency, increase your supply management opportunity astuteness, and do better at every task you do. There are a number of options, and some, like Next Level Purchasing, offer certifications recognized to various degrees around the globe.

And then they can start planning for next year by pushing for the acquisition and implementation of better technology and the transition to new and better processes.

* But hilarious!