Daily Archives: January 14, 2013

A Sourcing Innovation Prediction for 2013, Part I

A variant of the following conversation between a CEO and a CFO will happen in more than one Global 3000 firm this year:

The CEO, who has just arrived back from his most recent three-week luxury vacation in the Caribbean, walks into the CFO’s office:

CEO: So, how were sales on our new product line last month?

CFO: Zero.


CFO: Yes, Zero.

CEO: How did that happen? We spent millions with the top dog market research firm to make sure we produced exactly what the consumers wanted.

CFO: Yes, but

CEO: But what? We should have sold every unit we produced, and had them lined up at the gate for this month’s shipment.

CFO: I agree, but you see

CEO: No, I don’t see. The product should have been exactly what our customers wanted.

CFO: It probably was but

CEO: What do you mean it probably was?

CFO: I mean we don’t know since

CEO: We paid millions to know. It should have been perfect. We weren’t expecting every customer to switch right away, but given the choice between the new model and the old model, it was a clear cut choice.

CFO: I agree, it should have been a clear cut choice, but

CEO: But what?

CFO: If you’ll let me finish, I’ll explain.

CEO: It had better be a damned good explanation, or some heads are gonna roll around here — Today. You’ll be writing the pink slips before I leave the office! Anyway, explain.

CFO: It appears the product never made it onto the shelves!


CFO: The stores never got it.

CEO: But that’s why we just cut a new distribution deal with Automated Crossdock Co – so it would go direct from the contract manufacturer’s warehouse to the retail stores. Since we weren’t planning to order excess inventory, this was supposed to be the fastest, most cost effective way to get our product onto the shelves.

CFO: It should have been, but

CEO: But what? We cut a multi-million dollar deal to streamline our distribution and make our supply chain lean, mean, and just-in-time.

CFO: Yes, and in theory, it was perfect but

CEO: But

CFO: Let me continue, please!


CFO: But the product never made it to the cross-dock facility that was supposed to unload the inbound trucks, store the pallets overnight, and then ship them out on the outbound delivery trucks the next day.

CEO: Never made it? Did we get robbed? I was just reading how product theft by organized crime is on the rise due to the low risk and high-profit margins relative to running drugs and guns.

CFO: No, I made some calls, and it seems that our third party distributor never received delivery of the product.

CEO: But Automated Crossdock Co. were supposed to pick it up! Under the new deal, we made sure that they handled everything because our supplier wasn’t very good at managing its distribution system and the product was always late in the past. Did they not get the memo?

CFO: It seems they did. I got through to the distribution manager and he said that they sent trucks to the supplier’s warehouse on three occasions, and each time were denied entry to the lot.

CEO: Why?

CFO: They don’t know. Each time they were told that the supplier was having production delays, didn’t have the inventory, and were not making any shipments until the problems were resolved and to come back in exactly one week.

CEO: Production delays? According to our contract, the supplier was supposed to inform us immediately upon any production delay. Did they?

CFO: No.

CEO: So what happened?

CFO: I’m not sure. I tried to get in touch with our primary contact for a week, and every time I was told he was unavailable at the present time as he was out for personal reasons.

CEO: So you asked for who was handling his job.

CFO: Yes, of course, but was always told that person’s on the floor dealing with the issue and can not be contacted right now, and to call back tomorrow. And yes, I emailed and faxed, but no reply.

CEO: So we don’t know anything?

CFO: Not exactly. After getting the runaround for a week, I contacted the law firm we used to help review the contract locally and asked them to put in a call on our behalf, threatening a law suit if we didn’t get a prompt answer. Two days later, I got a call saying they were really sorry, but they had not yet recieved the shipment of raw materials they needed to complete our order and were trying to secure it from other manufacturers or providers in the area.

CEO: They were still supposed to inform us as soon as the delay impacted their ability to produce on time. Did they say why they didn’t?

CFO: They said that they thought we knew, that it was our contact’s job to inform us as per the contract.

CEO: The one who was unavailable every time you called with no notice of when he would return?

CFO: Yes, they said he know before he left and he was supposed to tell us and also us who would handle our concerns while he was away.

CEO: Well, we’ll deal with this contract violation later. Right now we have to correct the delay and get the product on the shelves. So what are they going to do about this delay? Our competition is set to launch their product next month and if we don’t get our product out soon, we could lose customers who upgrade to our competitor’s product over ours.

CFO: This is what I don’t know. The supplier says they’re doing their best, but when I ask if we can fly people in to help, they say they’re taking care of it, and cut me off.

CEO: Something isn’t right here.

CFO: I agree, so what do you want to do about it?

CEO: Well, first we have to figure out what’s wrong?