Monthly Archives: May 2013

For Lasting Results, Follow the Procurement Leaders … (Repost)

… but be sure to focus on the right characteristics first.

I posted this a year ago today, and I’m reposting because nothing has changed. This is still the right methodology, and, more importantly, the message has not sunk in yet at a large number of companies. The first three steps are absolute.

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.

If You Really Want to Reduce Carbon (And Costs) in Your Logistics

The answer is really, really simple.

Don’t waste miles and
Don’t waste space.

Every mile you have to travel burns fuel, which burns cash and produces carbon. Thus, the best way to minimize your logistics cost is to reduce the amount of fuel, which is best done by reducing the number of miles you have to travel and maximizing the return from every mile. This is clarified by a recent article over on the Supply Chain @ MIT site on Delivering Green which presents three case studies in low-carbon logistics.

The article, which studied logistics operations at Ocean Spray, Caterpillar, and Boise found that each could reduce cost, and carbon, by optimizing their logistics network to reduce the number of miles travelled and optimizing the shipments to maximize the use of the space available in the truck, railcar, or shipping container.

For example, in the Ocean spray case study, when Ocean Spray partnered with the rail operator and fruit shipping companies to ship more product intermodally, they were able to reduce the n umber of empty boxcars that were returning empty to the Florida region, reduce transportation costs by 40%, and reduce emissions by 65%.

In the Caterpillar case study, when shipping and packaging efforts were combined and streamlined, which resulted in denser and more efficient shipments, Caterpillar, which imports parts from all over the globe for assembly at its Illinois manufacturing facility, was able to reduce its overall carbon emissions by over 340 tonnes of CO2 per year.

In the Boise Inc case study, Boise was only loading its railcars two pallets high and leaving a significant space between the second pallet and the roof. When it redesigned its pallet, it was able to fully utilize the capacity of the railcar. Doing so allowed the company to reduce its overall CO2 emissions by 190 tons.

Efficiency makes a big difference.

Good e-Procurement Starts with e-Commerce Fundamentals

A recent article over on VentureBeat on how Maslow’s hierarchy can help you build a great mobile checkout process had some good advice for e-Commerce sites and some startling statistics that need to be heeded by e-Commerce providers AND e-Procurement providers alike. Consider these statistics:

  • 29% of mobile shoppers who abandoned the checkout process did so because they were requested to register before buying
  • 42% of consumers have stopped or abandoned a purchase on a web site because of a safety or security concern
  • 49% of mobile shoppers don’t shop more on their smartphone due to an awkward shopping experience
  • 63% of consumers prefer mobile commerce because they can do it while multi-tasking
  • 79% of decisive consumers would be more inclined to make online purchases if given easier and more secure payment options

This means that you need to keep the following in mind when designing your e-Procurement solutions:

  • make purchasing on third party sites a native experience – awkward punch-outs are not going to be adopted by average buyers,
  • organizations are not going to adopt your solutions if they see any security risks in using it,
  • if you’re going to build a mobile experience, make it intuitive and don’t try to do complex tasks on the mobile app as it will just frustrate your customers,
  • don’t ignore the mobile aspect because it’s harder to properly design and deliver – your customers want it, and
  • if its done right, your mobile solution will see widespread adoption by users, who will be inclined to quickly approve invoices and expense reports for payment when on the go.

As the author says, if you:

  1. Keep it Simple and meet the basic needs of your customers,
  2. Give Your Customers Peace of Mind and make the application secure,
  3. Create a Familiar Environment and make your customers feel like purchasing belongs in the e-Procurement system,
  4. Let Your Customers Run the Show and give them self esteem, and
  5. Keep Up with Your Customers and help them self-actualize

it stands to reason that your e-Procurement system will be a success.

The Other 1%!

These days, we’re hearing a lot about the 1% — the percentage of the population who control over 35% of the nation’s wealth, and control, at a minimum, 23 times the wealth controlled by the average person. And while it looks good on the books, right now, this isn’t the 1% anyone wants to be in, given the ire directed their way. But that’s not the 1% this post is about.

This post is about the 1% of companies that have implemented ILO (International Labour Organization) compliant supplier codes of conduct that are monitored and enforced. As per a recent publication by Zurich and Rockwell Automation entitled Safe Supply Chains Help Produce Sustainable Business, only 43% of major US companies have implemented supplier codes of conduct. Of these codes, only 10% reference ILO conventions. In addition, only 25% of companies perform even minimal monitoring against their supplier codes of conduct. In other words, the percentage of companies that have codes of conduct that reference ILO conventions and that are monitored is 0.43 * 0.10 * 0.25 = 0.01, or 1%! Ouch!

This is a disgrace! This is not the 1% we want in the Supply Management world! Every organization needs to shape up and do something about this right now.

  • Step 1: Get a supplier code of conduct. If your organization doesn’t want to invest the time drafting its own, borrow one (such as the publicly available JLP Responsible Sourcing Supplier Workbook) and modify it as appropriate or simply state that your organization complies with all relevant ILO labour standards, summarized in the Brief Introduction to International Labour Standards, and you have the right to monitor and inspect supplier operations to make sure they do the same.
  • Step 2: Make sure all relevant ILO standards are referenced.
  • Step 3: Monitor suppliers and, with other customers, insure an audit is done on an annual basis (by a responsible, neutral third party)*.

This isn’t hard. Just do it!

*It’s too disruptive to a supplier, and too costly, for every customer to audit the supplier every year. Instead, big customers should band together and hire an independent third party who’s good at conducting audits to perform an annual audit and make the results available to all customers, who can collectively apply pressure to a supplier violating ILO and individually take issue with any aspect of the supplier code of conduct that goes beyond ILO that is specific to that customer.

Do Great Supply Chains Create Great Brands?

Consider the Gartner Top 25 Supply Chain companies and the 25 top Brandz Top 100 Global Brands. Notice anything?

Gartner Top 25

01. Apple
02. McDonald’s
04. Unilever
05. Intel
06. Procter & Gamble (Gilette/Pampers)
07. Cisco Systems
08. Samsung Electronics
09. Coca Cola Company
10. Colgate-Palmolive
11. Dell
12. Inditex (Zara)
13. Wal-Mart Stores
14. Nike
15. Starbucks
16. PepsiCo
17. H&M
18. Caterpillar
19. 3M
20. Lenovo Group (Old IBM PC Unit)
21. Nestle
22. Ford Motor
23. Cummins
24. Qualcomm
25. Johnson & Johnson

    Brandz Top 25

01. Apple
02. Google
03. IBM
04. MacDonalds
05. Coca Cola
06. AT&T
07. Microsoft
08. Malboro
09. Visa
10. China Mobile
11. GE
12. Verizon
13. Wells Fargo
15. UPS
16. ICBC
17. Vodofone
18. Walmart
19. SAP
20. MasterCard
21. Tencent
22. China Construction Bank
23. Toyota
24. BMW
25. HSBC

Looking at the Gartner top 25 supply chain, 5 of the top 25 are also 5 of the top 25 global brands! In other words, 20% of the leading supply chain companies are also leading brands. Digging deeper, we find that 17 of the top 25 supply chain companies are also top 100 global brands, as mentioned in the BrandZ report. In other words, 68% of great supply chain companies are also leading global brands! Of the 8 companies that are not leading global brands, 3 are consumer good companies that have a large variety of brands (Unilever, Nestle, Johnson & Johnson), 1 is a primarily North American computer hardware provider (Dell), 2 are construction equipment giants and not expected to be a household name (Caterpillar and Cummins), 1 is a multinational manufacturing conglomerate with dozens of consumer and industrial brands (3M), and the last 1 produces chipsets for big-name mobile phone makers (Qualcomm). In other words, the only top 25 supply chain companies that are not top 100 global brands are precisely those companies that are not big consumer market companies or those companies that are conglomerates of a large number of smaller, but sometimes still Billion-dollar plus, companies.

And while it’s true that, at this point, this is just correlation, it’s a very significant correlation. While one may not be able to say that a great supply chain creates a great brand, these results seem to suggest that a great supply chain is needed for a great brand.