Monthly Archives: August 2014

Have You Mastered the 4th T of Tracery?

Regular readers will know that the time of PPT — People, Process, Technology — has long passed. In today’s fast paced world where product life-cycles are sometimes over as soon as they hit the market, and where your competitors are constantly striving to outpace you in both sales and supply management, you can’t live on processes anymore — they go stale almost as soon as you’ve got them figured out. And in a knowledge economy, just having a butt in a seat or a worker at an assembly line isn’t enough to succeed — you need a worker who, at the very least, is smarter than the average worker and, preferably, smarter than the worker employed by your competitor. And your technology cannot get out of date.

That’s why SI has been promoting the 3 T’s for years — Technology, Talent, and Transition. You need a solid, regularly updated, technology foundation upon which to build your modern Supply Management Organization. You need talent to put together good operating procedures, properly use the technology, and to constantly identify new opportunities for cost reduction or value generation. And you need great transition management as even best six sigma process today won’t cut it tomorrow when you need to upgrade your product offering, switch suppliers, change distribution methods, and make sure your product is Designed for Recycling from the get-go as new regulations are forcing you to take back your product at end of life and recycle it as you are using chemicals and / or rare earth minerals that are heavily regulated.

But while these are necessary conditions for Supply Management success, they are not necessarily sufficient. While it is true you will not succeed without a mastery of technology, talent, and transition management, as per our first post on Project Assurance, organizational success also depends on selecting a superior strategy and seeing it through until the desired results are achieved (or the organization changes its strategy, which hopefully wasn’t done arbitrarily on the whim of a CXO after talking to a buddy on the golf course). However, in order to properly implement a strategy, you have to not only see it through from start to finish, but you have to make sure all of the process streams necessary for success are both completed and properly synched. Just like the key to a good weave, as one might find in Egyptian Cotton, is a skillful interleaving of the thread, the key to a good strategy, is a skillful interleaving of the process strands into an effective transition plan from where you are to where you need to be.

And this, dear readers, is Tracery — the “delicate, interlacing, work of lines as in an embroidery”, or, more modernly, “a network” — the glue that not only binds the Technology, Talent, and Transition Management that your Supply Management organization needs to succeed, but that interleaves these threads in a way that causes each of them to reinforce each other and make a stronger whole.

Only 5 More Years …

Until the 500th anniversary of the sail date of the first Voyage of Circumnavigation!  Four Hundred and Ninety Five Years ago today, five ships (the Trinidad, San Antonio, Concepcion, Santiago, and Victoria) under the command of Ferdinand Magellan left Seville, Spain, in an expedition that, even after the death of Magellan in the Philippines on 27 April 1521, would be the first to circumnavigate the globe under the command of Juan Sebastian Elcano (who was Magellan’s second in command) when the Victoria returned to Spain on 6 September 1522.  This voyage took the fleet to the Canary Islands, the Cape Verde Islands, Santa Lucia Bay, Rio de Solis, Cabo Virgenes, around the tip of South America, to the Sharks’ Islands, San Pablo Island, the Ladrones Islands, Palawan, Brunei, Tidore, Ambon Iasland, Timor, The Cape of Good Hope, and then back to Spain.

Considering that there is no record of anyone completing the feat prior to this voyage, that the voyage was finished in 3 years in a time when you were sailing by sail alone, and that, even today, circumnavigation efforts take amateur sailors a year and half, this was no small feat*.  (For example, Laura Dekker, whose voyage was interrupted at several points, took 518 days to circumnavigate the globe in her 38 foot yacht.)

It was a historic day as Magellan, and Elcano, discovered new trade routes that would be utilized for centuries to come!

* Although it would have been faster had Magellan not tried to convert the Lapu-Lapu of the Philippines to Christianity, which not only cost the voyage time, but Magellan his life.

Risk Management and Suppliers: How Banks can Comply with the OCC’s Guidelines on Third-Party Relationships

Today’s guest post is from Rebecca Lorden, Business Development and Marketing Manager of Source One Management Services, LLC.

In October of 2013, the Office of the Comptroller of the Currency released specific guidelines to banks and federal savings associations that outline how their companies should assess and manage risks associated with third-party relationships. The OCC’s reason behind these guidelines was mainly due to the fact that “the quality of risk management over third-party relationships may not be keeping pace with the level of risk and complexity of these relationships“. (OCC Bulletin 2013-29, October 2013).

It is true that third-parties pose a threat if their own security protocols are not up to par with that of a major financial institution. In fact, in March of 2013, Bank of America became quite aware of this when they announced that a hack into TEKsystems, a third-party security firm they contracted, was the reason their internal emails were released to the public. These emails were no ordinary messages, but documented proof that Bank of America was monitoring hacktivist groups. Furthermore, the hacking group, known as Anonymous, later revealed that data was not retrieved from a traditional, time intensive and difficult hack, but “stored on a misconfigured server and basically open for grabs“. (“Bank Of America Says Data Breach Occurred At Third Party”, Computer World, February 2013). The scandal was not only damaging to Bank of America’s reputation, but also an obvious indication that banks needed to manage supplier risk more effectively.

The OCC’s guidelines outline eight key phases that should be considered when developing risk management processes. These phases include planning, third-party selection, contract negotiations, monitoring, termination, accountability, reporting and reviews. As clear as that might be, banks are still struggling on how to properly implement controls around these factors. That is where supplier relationship management can play a significant role.

Supplier relationship management, otherwise known as SRM, is the actual practice of strategic planning and managing all interactions with third-parties to maximize their value. Many think of SRM as a way to reduce spend. SRM processes can reduce quality issues and delays with suppliers that, in turn, can translate into cost savings. More importantly, however, SRM can function as a main component in reducing a bank’s risk with suppliers. Supply chain experts feel as though SRM offers a “solid framework” that can provide companies with a “formal risk and control process to follow“. (Building The Case For Supplier Relationship Management, May 2014).

For those that already have an SRM program in place, or believe SRM is just a sales tactic for supply chain consultants, now may be the time to reevaluate. First, suppliers can be neglected over the course of their contract. Even if the relationship started off on a good foot, the value from a supplier can diminish pretty quickly, especially if the supplier or the bank is faced with turnover or a redirection in initiatives. SRM dictates a process that continually communicates and supports the relationship, helping build supplier engagement no matter what changes are on the horizon. Secondly, for those non-believers, consider this: if managing suppliers is now a major priority set by the OCC, what better way to adhere to these guidelines than to build a solid foundation on which to base all third-party relationships on?

It certainly seems that these OCC guidelines are a daunting task for banks to tackle. Managing supplier risks and enforcing compliance is not something that can be done overnight. Banks, however, have a secure solution in supplier relationship management. SRM can be the catalyst to successful third-party relationship management, ensuring that the risks are minimized to the best of a bank’s ability.

Thanks, Rebecca.

Project Assurance Specialist: What Do You Look For?

In our series on Project Assurance: A Methodology for Keeping Your Supply Management Project that we just wrapped, we discussed Project Assurance — a specialized discipline and practice involving independent and objective oversight, specialized experience, and audit skill to assess risk, finance, accounting, compliance, safety, and performance for any major capital expenditure. It is designed to minimize the risk of projet overruns and failure.

In today’s post we will discuss what makes a good Project Assurance Specialist. Not just anyone can perform such a task. What are the skills that such an individual must posses to be successful? What must define the core of her, or his, EQ?

We’ll start by referencing the intervention process pyramid defined by Prinzo in No Wishing Required. According to Prinzo, collaborative intervention requires you to:


Implement the Solution
Communicate the Findings
Negotiate the Solutions

 


Navigate the Organization
Identify the Decision Making Process
Conduct Mini-Briefings

 


Build the Foundation
Behaviours
Trust & Credibility

 

Each step of the process requires a base set of skills, some of which Prinzo did a great job explaining in his book. In this post, we will discuss those core skills along with the secondary skills that are needed for assurance success.

The core skills required to build the foundation, as defined by Prinzo, are:

  • receptivity
    the assurance specialist needs to listen carefully to understand the situation
  • comprehension
    the assurance specialist needs to take the time to properly understand the situation
  • compromise
    the assurance specialist needs to find the middle ground that all parties will (reluctantly) accept
  • humility
    sometimes the assurance specialist needs to make the solution appear to be the idea of one or more stakeholders even if all of the credit is due to the specialist — sometimes harmony is key
  • objectivity
    the assurance specialist cannot take sides and cannot be blind to the truth
  • diplomacy
    even when some stakeholders should be slapped upside the head or strangled for pig-headed viewpoints that could put the entire project in jeopardy, the assurance specialist needs to be diplomatic
  • strategy
    not only does the assurance specialist need to navigate the explosive stakeholder minefield, but come up with solutions that will be acceptable and successful
  • analysis
    the assurance specialist needs to dig deep and sometimes read between the lines to determine where the issues are and what the solutions need to look like

But that’s just the foundation. In addition to these skills, the assurance specialist will also need the following skills to navigate the organization:

  • organizational knowledge
    without a good knowledge of the workings of the organization, it will be very hard for the assurance specialist to navigate it
  • team building
    even though it is the job of the assurance specialist to find the issues all others miss, it will often take a cross-functional team to implement their mitigations
  • communication
    the mini-briefings will have to be very effective in order for the resolution sessions to go well

Finally, the assurance specialist will also need the following skills to implement the solution:

  • negotiation
    diplomacy and compromise are a good start, but sometimes the assurance specialist will require the use of persuasion to get all parties in sync
  • leadership
    while it will often require a cross functional team to implement the mitigation, that team will still need the guidance of a leader and that role falls to the assurance specialist

In other words, it takes someone with a skill set that goes beyond basic project management skills to be a project assurance specialist.