Monthly Archives: September 2016

Navegador Nightmares? It’s Your Own Damn Fault!

In the midst of the recent receivership of Hanjin shipping, the seventh largest shipping line by overall capacity, there are a lot of trepidations, fears, and worries by companies that use it for shipping, and in particular, companies that already have cargo on its ships. (As noted by Bob Ferrari over on Supply Chain Matters in The Financial Shot Heard Across the Globe, many global ports will not accept nor export cargo on the carrier’s vessels because of uncertainties as to whom we pay charges or more importantly, whether specific vessels will be seized by creditors as captured assets, meaning that not only can vessels on the water not be loaded, but they can’t be unloaded.)

Now, if you happen to be working in one of the organizations relying on this carrier, directly or indirectly, you’re probably screaming “how did they let this happen” (where “they” is, in your mind, poor management) and “what the hell do I do now” (and the answer is easy, what you should have done in the first place, and we’ll get to that) and that would be fine, if you were focussed on the right “they” and were simply choosing among your different (pre-planned) disaster recovery options, but chances are it’s the wrong “they” you are focussed on and, as the organization never allowed Supply Management the time to do proper risk assessments and disaster recovery plans, there are no backup plans ready to go.

The short answer is unless you are including yourself in the “they”, as the “they” is all of the Procurement and Logistics managers who not only selected the carrier but encouraged the excessive growth, and unless you are acknowledging that your lack of a disaster recovery plan for this very predictable likelihood (as it’s easy to identify a supply chain choke point and what could go wrong – in this case, all your products in containers on the same ship and that ship all of a sudden going missing, and whether it sinks, gets captured by pirates, or seized by creditors is irrelevant from a recovery point of view), you’re not focussed on the right questions, what you should do about it, and what you should have done in the first place.

Maybe you had little option (as you were shipping from Korea and this was the only reasonable shipping deal you, or your 3PL, could cut), but you could still plan on a lost shipment, have a supplier with excess capacity (in overtime if necessary) that could replace the shipment quick, and a back-up (more expensive carrier) ready to activate if needed (along a different route). This would be okay and proper, especially if you really did need to outsource to Asia, but how many companies did it okay and proper? Judging by the number of articles and semi-widespread panic (and fears of more receiverships and bankruptcies because of the over-capacity, not too many).

But chances are you got yourself into the situation where you had little option, by far-sourcing something you didn’t need to far-source. You got caught up in the outsourcing craze in the 90’s, believed all the hype about lower costs (because of lower unit costs due to weaker Asian currencies, lower wages, etc.), and didn’t look at the full TCO, which also included transportation costs that could be 10X what you were paying when you were near-sourcing from Central America (from the US), skyrocketing T&E costs (because if you didn’t go on-site regularly, you didn’t get what you wanted), and phone-bills that looked like office building lease payments. And maybe if you were in electronics China and Korea had the better factories, but how hard would it have been to invest in new factories in Mexico and Brazil, relocate the necessary top-talent to get them going, and recoup the initial investment in orders of magnitude over a ten to twenty year time-span? Not hard.

Basically, by outsourcing everything you could identify faster than rabbits without any natural enemies can breed, you built up a need for a lot of capacity, which the industry responded to, but when you kept going, the shipping industry, not wanting to get caught with its pants down again, analyzed the trends and kept building. Then, when oil went through the roof, and the smarter companies realized that long-term strategic near-sourcing (and, when possible, home-sourcing) was actually the best option after all was said and done, and pulled back, there was glut capacity and the shippers, who overbuilt, were now stuck with capacity, overhead, and loans they couldn’t pay. This is all a result of poor long term planning on the part of Procurement, and your predecessors, which, in all honesty, you should have been endeavouring to fix as each and every outsourced category came up for re-sourcing (as you should only produce products in Asia for Asia if you can help it — even FoxConn has realized this and opened a Brazilian factory — slow ramp-up not withstanding).

So, whether you created the mess or not, you’re in the job now and it’s up to you to fix it, and the navegador nightmares, the doctor is sad to say, are your own.

Waste Not. Want Not.

Corporate Social Responsibility (CSR) and sustainability is all the rage with Generation Y and, in many countries, is essentially the law (where environmental protection is a key concern of citizens and law makers alike) — but are you doing everything you should (even if it is not yet legislated)?

Basically, if you procure it, and it is not used, you wasted it — and if you are not careful, it will go to a landfill, and that should be unacceptable.

However, in many companies, the focus on CSR and Sustainability is on the supply chain, and the Tier 1 (and Tier 2) suppliers as it is expected the company will comply with all laws and adhere to its own Sustainability and CSR policies, but this over-focus on the supply chain often results in drips of waste throughout the organization that, when added up, create a small pond, if not a large lake.

What do we mean by this?

Due to a lack of initiative or control by Procurement, the following happens in most organizations:

  • paper, paper everywhere especially in the back office (as AP needs to print invoices that fail OCR to re-enter them, legal has to print contracts to review them, managers need their reports on paper, etc.)
  • obsolete MRO inventory piles up in the stock room as excess parts for equipment replaced years ago doesn’t go with the equipment
  • low-cost defective products pile up in the back of the warehouse as it’s not worth the perceived return costs for minimal cost products or low volumes
  • non-recyclable packaging goes to the trash and the local landfills (and dumping costs) pile up
  • broken pallets litter the corner of the yard and are left to rot

But Procurement could prevent most of this.

  • demand management reduces paper especially if Procurement ensures AR, Legal, Managers, and anyone else who generally uses a lot of paper has dual monitor systems. A couple of hundred on a good extra monitor can reduce paper usage by 80% and only has to be replaced every 4 to 5 years.
  • MRO management (software) either in house or third party can instantly detect when inventory is obsolete and sell it to someone who needs it before all it is useful for is scrap metal
  • up-front return process definition and management ensures that defective products get promptly returned, or recycled, to make sure scrap yards don’t increase
  • insistence on reusable or recyclable packaging and making it mandatory in contracts can prevent packaging waste
  • better pallet acquisition can increase lifespan and a recycling/disposal policy can make sure the wood goes to good use

In other words, unless Procurement makes an effort to define its wants as waste free as possible, it will get its wasteful wants. Another point to ponder.

Want an Exceptional Supply Management System? Do NOT Forget the Supplier!

Exceptional results come from the right intersection of exceptional talent, exceptional technology, and exceptional transformation. The three T’s.

And while each piece is important, and no piece can be ignored, the importance of good technology is often overlooked, and, more importantly, key factors that differentiate good technology from great (and exceptional) technology are almost always overlooked — and this is one reason why there are so few true best in class Procurement organizations (and why the Hackett top 8% is the top 8%).

So what makes a great Supply Management System?

Factors include, but are not limited to:

  • ease of use as even a junior buyer should find it natural
  • customizeable workflow as it should fit the transformed organizational processes
  • data import/export as data will need to be imported from ERPs and predecessor systems and exported to successor systems
  • templates and template customization so that RFXs/Auctions/Orders/etc. can easily be created, customized, copied and reused ad infinitum
  • multi-currency support as most Procurement organizations have to deal internationally

And each and every one of these factors should be considered, and included in the evaluation of the supply management system, and systems that do not score well against each and every one of these factors tossed aside, but is this enough to insure you get a great system? Of course not!

First of all, it has to contain all of the specific functions required of the system you are evaluating. For example, if the organization is looking for strategic sourcing, then the organization needs optimization-backed RFX and Auction capability as well as analytics and spend analysis. For Procurement, requisition management, approvals, budget integration, automatic (split) PO creation, good receipt management, invoice acceptance and m-way comparison, etc. And so on. If all functions are there, and all work well, it could be a great system — for the organization.

But will it be an exceptional one? Not necessarily. Exceptional systems need lots of data — and use — to produce exceptional results. Some needs to come from the organization. Some needs to come from third parties. And some needs to come from suppliers. And typically that data is needed in (near) real time. Which means you need suppliers to use the system — which is something they are only going to (want to) do if it’s easier for them to do it in the system, than do it outside the system (and bitterly complain if they are forced to use it to submit invoices to get paid).

This means that the system also needs to be designed for the supplier — something many first, and even second, generation systems were not, even if they had a supplier portal.

Not only should the system be as easy to use for the supplier as it is for the buyer, but it should enable their workflows, provide them with templates, make data import and export as easy for them as it is for the buyer, offer them full multi-currency support as well, and support the internationalization necessary for all of your suppliers in the countries you do business with to use it in their native language.

For example, if you want a supplier to respond to each and every RFX and auction, make it easy for them to manage their catalogs and quickly select the relevant products, update price lists, define volume discounts, and define what you get to see — and don’t get to see. If you want a supplier to use it for e-Invoicing, make it easy for them to upload, create, manage, and track invoice status not just of invoices sent to you, but of all their invoices (as chances are their AR system or sales system doesn’t do that). Make sure they have the same rights to create user accounts, set permissions, and delegate work (especially with respect to RFX responses) to the right people as you do. Let them toggle between languages. And, most importantly, before they submit, let them see what you see the way you see it.

And if the system is truly exceptional, you’ll easily be able to see what they see (with a toggle view) before you send it. Suppliers are your supply chain, so it’s as important to support them as it is to support you — and an exceptionally designed system will do that.

If you want to stand out, don’t answer the top 10 procurement questions! Part II!

As per yesterday’s post, if you Google “top procurement question”, you get a bunch of links to articles about top procurement interview questions and how to answer them, including this Slideshare that has some decent questions and answers, but not questions the doctor would actually ask other than to see how sharp you were (at detecting hidden intent), and definitely not answers that showcase the true range of your Procurement capabilities — which is what the doctor would want to know (as he’d only interview for a senior position and only if a company wanted a true leader, which most companies, despite the talk, still don’t want — but that’s another book). In our last post, we took the first five one by one. In this post, we’ll take the last five one by one.

Question: What Do You Know About Us?

Suggested Answer What Googling that Sh*t told you.

Problem: Of course it’s important to know what the company does, what it’s (stated) values are, etc. — and any good candidate is going to know that. So how do you expect to stand out?

Real Answer: I know that you do … and that you are committed to … but I also know that this presents a number of challenges for a Procurement organization, including … What ones are you experiencing now, how are you addressing them, and what ones will this position get to tackle? With respect to … I feel I could be a big help because of my experience with …


Question: Why Do You Want To Work With Us?

Suggested Answer Honest answer that addresses the organization’s values and vision.

Problem: Every candidate and their aloof disinterested cats can bullsh!t a 100% acceptable response to this question and it often plays little into day to day responsibilities where the rubber meets the road.

Real Answer: I love your value and vision and the products you make, but most importantly I love the work that I expect I will be doing on a daily basis. I can’t wait to apply my skills in X, learn more about Y, and tackle new territory in Z. There’s just so much to do that I feel this is just a starter role and I can have a career at your company, and maybe even your job someday when you are promoted to COO or CEO (as all good CPOs should be).


Question: Why Should We Hire You?

Suggested Answer An answer that links your skills, experience, education, and personality to the job itself.

Problem: Again, every candidate and their aloof disinterested cats can bullsh!t a 100% acceptable response to this question and it often plays little into day to day responsibilities.

Real Answer: An answer that links your skills, experience, education, and personality to the job AND showcases the innovation you can bring.


Question: What Kind of Salary Do You Need?

Suggested Answer Turn it Around, because she who plays chicken first loses the negotiation.

Problem: Salary is only one aspect of the picture.

Real Answer: It depends on the overall benefits package. I’m looking to stick around, so what do you have for health/disability benefits, retirement savings matching, continuing education, work-life balance, etc. Don’t just turn it around, say you expect your worth, but you’ll consider the full picture.


Question: What Questions Do You Have For Us?

Suggested Answer Any question that will allow you to demonstrate how you might make an impact.

Problem: Actually, this is the only question the doctor does not have a problem with, if you take the right approach, and the question is broad enough for you to do that! Just be sure to use all the tips and tricks outlined in the last nine points to emphasize you want to understand better how you can help and prepare yourself to hit the ground running, tomorrow even.

If you want to stand out, don’t answer the top 10 procurement questions! Part I!

If you Google “top procurement question”, you get a bunch of links to articles about top procurement interview questions and how to answer them, including this Slideshare that has some decent questions and answers, but not questions the doctor would actually ask other than to see how sharp you were (at detecting hidden intent), and definitely not answers that showcase the true range of your Procurement capabilities — which is what the doctor would want to know (as he’d only interview for a senior position and only if a company wanted a true leader, which most companies, despite the talk, still don’t want — but that’s another book). To explain, we’ll take them one by one.

Question: Describe a suggestion of yours that was implemented.

Suggested Answer: Any suggestion you made that your employer adopted to some degree of success.

Problem: If your boss was the PHB’s (Pointy Headed Boss’) brother, then chances are your best suggestion wasn’t even understood, yet alone considered. Their failure shouldn’t be your failure just like their random success shouldn’t be your success. The real key to evaluating your innovation capability is the best suggestion you made (implemented or not), why, and the data you have to back it up.

Real Answer: The best suggestion that was implemented was … as it increased effectiveness/efficiency/sustainability in the following way … but … the best suggestion I ever had was … as it would have increased effectiveness/efficiency/sustainability in the following ways (and I did the following analysis to back it up) … but due to lack of risk tolerance / change management support / etc, it unfortunately never got implemented. Then ask, “how does your company support this process”?

Question: What Experience Do You Have in Procurement?

Suggested Answer Whatever you did to support Procurement, direct or indirect.

Problem: The best Procurement professionals ARE NOT from Procurement (fields).

Real Answer: I have the following Procurement experience, but the real contribution I am able to make is my background in engineering/manufacturing/IT/etc. as it will allow me to better support your engineering/manufacturing/IT/etc. as I know what they need, why, and where to find better alternatives, etc.

Question: What Is Your Greatest Weakness?

Suggested Answer What you honestly feel, why, and what you are doing to tackle it.

Problem: Your greatest weakness might be relatively harmless in your target role. Maybe it’s people skills, but you are applying to be the senior analyst to support the senior negotiator. Maybe it’s math, but the organization is one of the smart few with an optimization-backed sourcing platform. Etc. Little impact.

Real Answer: My greatest weakness is … and I am doing this to improve on it … but I feel, even though I’m relatively strong, the area I could most improve in is … as doing so would help me deliver my employer the following benefits …

Question: What Challenges Are You Looking For?

Suggested Answer Any challenge — past, present, or future — that will allow you to utilize your skills.

Problem: What you are seeking might be of zero help to your employer.

Real Answer: The challenges I expect to encounter in this position are … and I expect to be able to tackle them using … and expect these … benefits. You want to show that you’ve done your homework and know what you’d be getting into and are the perfect candidate.

Question: Have You Ever Had a Conflict? How Was it Resolved?

Suggested Answer Describe a conflict and how you handled it in a way that emphasizes your approach to conflict resolution.

Problem: If this is your first senior Procurement role, the conflicts of the past are playground to what you should expect to encounter.

Real Answer: Start out with the suggested answer, but move on to the methods you will use during communications and negotiations with stakeholders and suppliers to try and avoid conflicts in the first place. Conflict resolution is good … but conflict avoidance is better!